The Mexican Interest Rate Pass-Through in the Post-U.S. Subprime Mortgage Crisis Era

Chu V. Nguyen

The International Trade Journal, 2018, vol. 32, issue 1, 100-115

Abstract: This study investigates the nature of the Mexican interest rate pass-through during the post-U.S. subprime mortgage crisis. The empirical results reveal a very high short-run and an almost complete long-run interest rate pass-through. The bounds test indicates a long-term relationship between countercyclical monetary policy and market rates. Notwithstanding the rigid inflation targeting set by the Mexican Central Bank in the very concentrated Mexican market and its openness to foreign competition, the Mexican open economy is very small compared to the U.S. economy. Despite these conditions, the Mexican Central Bank has been very effective in conducting its countercyclical monetary policy.

Date: 2018
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DOI: 10.1080/08853908.2017.1360226

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