Monetary policy in emerging economies. Between price stabilization and economic stagnation: The case of the Mexican economy in the period 2000-2020

Santiago Capraro and Roberto Valencia
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Roberto Valencia: Universidad Nacional Autonoma de Mexico

Sobre México. Revista de Economía, 2024, vol. 1, issue 10, 52-100

Abstract: This paper develops theoretical models of inflation targets that reconcile two phenomena that have characterized the Mexican economy in the period 2000-2020: this economy has presented a low and stable inflation and economic growth rate. To carry out this task, the transmission channels of monetary policy are first analyzed, particularly those of the interest rate and credit. Then, the natural growth rate of the economy is endogenized, exploiting the strong correlation that exists between this variable and the effective growth rate. The development of the models shows the conditions that must be met for a contractionary monetary policy to have a permanent negative effect on the growth rates of the economy at the same time that inflation is controlled. These conditions imply that credit has a strong response to the level of growth of the economy and that the natural growth rate depends positively on the effective growth rate.

JEL-codes: C00 E31 E50 O00 O11 O54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:smx:journl:10:52:100

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