Inflation targeting and the consistency of monetary policy decisions in Mexico: an empirical analysis with discrete choice models

Muñoz Torres, R.I., Shepherd, D. and Muñoz Torres, R.I. 2014. Inflation targeting and the consistency of monetary policy decisions in Mexico: an empirical analysis with discrete choice models. The Manchester School. 82 (S2), pp. 21-46.

TitleInflation targeting and the consistency of monetary policy decisions in Mexico: an empirical analysis with discrete choice models
AuthorsMuñoz Torres, R.I., Shepherd, D. and Muñoz Torres, R.I.
Abstract

This paper examines the nature of monetary policy decisions in Mexico using discrete choice models applied to the Central Bank's explicit monetary policy instrument. We find that monetary policy adjustments in Mexico have been strongly consistent with the CB's inflation targeting strategy. We also find evidence that monetary policy responds in a forward-looking manner to deviations of inflation from the target and that observed policy adjustments exhibit asymmetric features, with stronger responses to positive than to negative deviations of inflation from the target and a greater likelihood of policy persistence during periods when monetary policy is tightened, compared with periods when policy is loosened.

JournalThe Manchester School
Journal citation82 (S2), pp. 21-46
ISSN1463-6786
Year2014
PublisherWiley
Digital Object Identifier (DOI)doi:10.1111/manc.12039
Publication dates
PublishedDec 2014

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