This paper studies monetary policy rules in a small open economy with Inflation Targeting, incomplete pass-through and …

Mexico in the period 1996-2011, which was characterized by a reduction in the level and volatility of inflation. Our results … downward nominal wage rigidities seems to have increased slightly as inflation decreased, as found in studies for some other … countries that achieved a lower and more stable inflation. …

inflation, a finding that is at odds with the assumption of constant indexation parameters in most New-Keynesian DSGE models. We … response to aggregate shocks and monetary policy. We show that workers index wages to past inflation when output fluctuations … are primarily explained by technology and permanent inflation-target shocks, whereas they index to trend inflation when …