We analyze some of the effects of the peso’s real appreciation on the output-inflation policy dilemma. Thanks to the appreciation, it is possible to achieve simultaneously a higher real wage and a lower inflation rate without need of output loss. After the capital inflows that support the...

An econometric examination of interest rate differentials reveals the existence of a significant relationship between the level of exchange rate policy credibility in Mexico during 1991-1994, and the country’s macroeconomic performance, the central bank international reserves and the NAFTA...

Based on the so-called bounds testing approach, the paper studies the long-run effect of capital flows and the real exchange rate on Mexico’s private investment from 1988 through 2008, presenting two main results. First, while capital inflows can potentially increase investment, in practice...

This paper examines empirically the interest rate-exchange rate link in the context of the Mexican experience with a floating exchange regime. The impulse response function derived from an ECM estimated by GMM reveals a lasting positive effect of a currency depreciation on the peso-dollar...

Based on the so-called bounds testing approach, the paper studies the long-run effect of capital flows and the real exchange rate on Mexico’s private investment from 1988 through 2008, presenting two main results. First, while capital inflows can potentially increase investment, in practice...