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Anchoring of Inflation Expectations after Adverse Supply Shocks

Ana María Aguilar Argaez, Gabriel Cuadra (), Claudia Ramirez Bulos and Daniel Samano ()
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Ana María Aguilar Argaez: Banco de México

Monetaria, 2014, vol. II, issue 1, 49-81

Abstract: In order to create an environment of low and stable inflation in Mexico it has been necessary to generate a framework for the conduction of monetary policy focused on preserving an environment of price stability along with fiscal discipline. In this context, this paper describes some structural achievements to control inflation that have been attained in Mexico. In addition, it shows empirical evidence in favor of the anchoring of inflation expectations, particularly those for the médium and long term, being recently strengthened. It presents an analysis considering three episodes in which inflation in Mexico was subject to different supply shocks, and it finds that of the episodes analyzed, which were within the period 2004-2012, it was during the episode observed in 2012 when inflation expectations showed greater stability, which suggests a strengthening of the credibility of the Bank of Mexico’s commitment to price stability.

Keywords: inflation expectations; anchoring inflation expectations; cost-push shocks; monetary policy; Mexico (search for similar items in EconPapers)
JEL-codes: E52 E58 E65 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:cml:moneta:v:ii:y:2014:i:1:p:49-81