Arbeitspapier
Explaining inflation with a classical dichotomy model and switching monetary regimes: Mexico 1932-2013
This paper applies a novel approach to study the impact of different shocks on the price level. It uses a classical dichotomy model with monetary policy regime shifts at known dates. First, there was a regime dominated by money, afterwards a regime driven by the exchange rate and a third one with inflation targeting. The result is a CVAR with constant long-run parameters but regime-dependent adjustment coefficients. This overcomes the challenge of explaining, within a single theoretical framework, inflation dynamics in Mexico since the country abandoned the gold standard. The model encompasses known results, offers new insights and clarifies decades-old debates on key aspects of the inflationary process such as inertia, the role of money, the exchange rate pass-through and the impact profile of other variables. The model proposed here is very parsimonious, it does not require inflation lags nor dummy variables. It also displays a very good pseudo out-of-sample forecasting performance
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Papers ; No. 2017-20
- Klassifikation
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Demand for Money
Monetary Policy
- Thema
-
Money Velocity
Exchange Rate
Inflation
PPP
Fiscal Deficit
Cointegration
Monetary Regimes
Unbalanced Regressions
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Garcés Díaz, Daniel G.
- Ereignis
-
Veröffentlichung
- (wer)
-
Banco de México
- (wo)
-
Ciudad de México
- (wann)
-
2017
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Garcés Díaz, Daniel G.
- Banco de México
Entstanden
- 2017
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