This paper estimates the magnitude of the exchange rate pass-through to consumer prices in Mexico. Moreover, it analyzes if the pass-through dynamics have changed in recent years. In particular, it uses a methodology that generates results consistent with the hierarchy implicit in the CPI. The...

We develop and estimate an affine model that characterizes the dynamics of the term structure of interest rates in Mexico. Moreover, we provide empirical evidence on the relationship between the term structure factors and macroeconomic variables. First, we show that the model fits the data...

This paper characterizes the behavior of debt and tax rates in a small open economy under both complete and incomplete markets. First, I show hat when the government follows an optimal fiscal policy and agents have access to complete markets, the value of the government’s debt portfolio is...

We study the dynamics of the term-structure of interest rates in Mexico. Specifically, we investigate time variation in bond risk premia and the common factors that have influenced the behavior of the yield curve. We find that term-premia in government bonds appear to be time-varying. We then...

This paper studies optimal fiscal policy in a small open economy model under incomplete financial markets, where interest rates, government spending and productivity are stochastic and taxes are distortionary. The contributions of the paper are twofold. First, I solve the Ramsey problem and...

This paper investigates how different macroeconomic shocks affect the term-structure of interest rates in Mexico. In particular, we develop a model that combines a no-arbitrage specification of the term structure with a macroeconomic model of a small open economy. We find that shocks that are...