Monetary Policy Rules in a Small Open Economy: An Application to Mexico

Rodolfo Cermeño, F. Alejandro Villagómez and Javier Orellana Polo

Journal of Applied Economics, 2012, vol. 15, issue 2, 259-286

Abstract: We estimate a small-scale macro model for the Mexican economy under the New Keynesian (NK) framework and alternative interest rate rules for Mexico. With these results we evaluate the performance of the Bank of Mexico against a set of optimality principles derived in the NK literature. Our system estimation results show that the Bank of Mexico holds a preference for stabilizing not only inflation around target, but also acts to achieve an output gap close to zero. Furthermore, we find that the central bank responds non-linearly to real exchange rate depreciations. We also find that the central bank has actively attempted to neutralize demand and supply shocks through monetary policy that is consistent with the Taylor principle.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1016/S1514-0326(12)60012-9 (text/html)
Access to full text is restricted to subscribers.

Related works:
Journal Article: Monetary policy rules in a small open economy: an application to Mexico (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:recsxx:v:15:y:2012:i:2:p:259-286

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/recs20

DOI: 10.1016/S1514-0326(12)60012-9

Access Statistics for this article

Journal of Applied Economics is currently edited by Jorge M. Streb

More articles in Journal of Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().