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Inflation Targeting and the Consistency of Monetary Policy Decisions in M exico: an Empirical Analysis with Discrete Choice Models
Author(s) -
Muñoz Torres Rebeca I.,
Shepherd David
Publication year - 2014
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12039
Subject(s) - monetary policy , economics , inflation targeting , inflation (cosmology) , monetary economics , consistency (knowledge bases) , macroeconomics , physics , geometry , mathematics , theoretical physics
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.