Inflation targeting and inflation expectations in Mexico

Carlos A. Carrasco, Jesus Ferreiro

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

In this article we analyse inflation expectations in Mexico. After a review of the theoretical and empirical literature, we apply unit root, normality and cointegration tests to the data provided by Banco de México (Banxico) in the Survey on the Expectations of the Private Sector Economics Specialists. Our results reject the null hypothesis of normality for inflation expectations over the period 2004:01-2011:12. The exchange rate has become one of the most relevant variables in the transmission mechanism of monetary policy in a small open economy. In this regard, we show the existence of a long-run relationship between nominal exchange rate and interest rate where inflation expectations matter for long-term dynamics. © 2013 Taylor & Francis.
Original languageEnglish
Pages (from-to)3295-3304
Number of pages10
JournalApplied Economics
DOIs
Publication statusPublished - 1 Jan 2013
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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