Arbeitspapier
What determines the neutral rate of interest in an emerging economy?
Evidence suggests that potential growth and the neutral rate co-move in advanced economies. In contrast, this co-movement is not observed in emerging economies. We argue that capital flows may explain this behavior. We focus on Mexico, a benchmark emerging economy, and find that capital inflows may account for a temporary reduction in the Mexican neutral rate after the global financial crisis. These inflows surged during the implementation of unconventional monetary policies in advanced economies. In turn, low-frequency changes in the neutral rate may be attributed to increasing domestic savings, demographics, and a decreasing global long-run real interest rate. These results are largely consistent with other studies showing that the neutral rate has decreased in the last 25 years in advanced and emerging economies.
- Language
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Englisch
- Bibliographic citation
-
Series: Working Papers ; No. 2018-22
- Classification
-
Wirtschaft
Econometric and Statistical Methods and Methodology: General
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
- Subject
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Neutral rate of interest
emerging market economies
transitory and structural factors
- Event
-
Geistige Schöpfung
- (who)
-
Carrillo, Julio A.
Elizondo, Rocio
Rodríguez-Pérez, Cid Alonso
Roldán-Peña, Jessica
- Event
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Veröffentlichung
- (who)
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Banco de México
- (where)
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Ciudad de México
- (when)
-
2018
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Carrillo, Julio A.
- Elizondo, Rocio
- Rodríguez-Pérez, Cid Alonso
- Roldán-Peña, Jessica
- Banco de México
Time of origin
- 2018
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