EconPapers    
Economics at your fingertips  
 

What Determines the Neutral Rate of Interest in an Emerging Economy?

Julio Carrillo (), Elizondo Rocío, Rodríguez-Pérez Cid Alonso and Roldán-Peña Jessica

No 2018-22, Working Papers from Banco de México

Abstract: Evidence suggests that potential growth and the neutral rate co-move in advanced economies. In contrast, this co-movement is not observed in emerging economies. We argue that capital flows may explain this behavior. We focus on Mexico, a benchmark emerging economy, and find that capital inflows may account for a temporary reduction in the Mexican neutral rate after the global financial crisis. These inflows surged during the implementation of unconventional monetary policies in advanced economies. In turn, low-frequency changes in the neutral rate may be attributed to increasing domestic savings, demographics, and a decreasing global long-run real interest rate. These results are largely consistent with other studies showing that the neutral rate has decreased in the last 25 years in advanced and emerging economies.

Keywords: Neutral rate of interest; emerging market economies; transitory and structural factors (search for similar items in EconPapers)
JEL-codes: C10 E43 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2018-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.banxico.org.mx/publications-and-press/b ... -52C4EEE3BE29%7D.pdf (application/pdf)

Related works:
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:bdm:wpaper:2018-22

Access Statistics for this paper

More papers in Working Papers from Banco de México Contact information at EDIRC.
Bibliographic data for series maintained by Dirección de Sistemas ().

 
Page updated 2019-04-19
Handle: RePEc:bdm:wpaper:2018-22