LONG AND SHORT TERM EFFECTS OF DEPRECIATION OF THE MEXICAN CURRENCY ON THE CURRENT ACCOUNT EFECTOS DE LA DEPRECIACION DE LA DIVISA MEXICANA DE CORTO Y LARGO PLAZO ANTE LA BALANZA POR CUENTA CORRIENTE

Mario Aceves Mejia and Cesar Kevin Romero Heredia

Revista Internacional Administracion & Finanzas, 2017, vol. 10, issue 3, 53-72

Abstract: From 2014 to January 2016, the Mexican Peso Currency has depreciated by 30 percent compared to the US dollars. Therefore, we expect in the long-term, Mexican exports would become more attractive in the US market. However, Banco de Mexico has tried to mitigate this situation to avoid the pass-through effect on domestic prices. The goal is to achieve its sole objective of inflation targeting, regardless of resulting shocks to the competitiveness engine of economic growth, led by the exporting sector. This intervention can slow and even revert positive long-term effects, leading to adverse scenarios and less stability. This paper aims to explain the existence of areas of opportunity for both investment aimed at national and international markets. We argue that while monetary policy weakens the advantages of foreign trade, lack of input suppliers or of imported goods producers are thriving branches for private investment. These branches may create competitive advantages and explore established markets

Keywords: Exchange Rate; Inflation; Mexican Exports (search for similar items in EconPapers)
JEL-codes: E31 F21 F32 O24 (search for similar items in EconPapers)
Date: 2017
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