TITLE:
Inflation, Monetary Policy and Economic Growth in Mexico. An Inverse Causation, 1970-2009
AUTHORS:
Eduardo Loría, Jorge Ramírez
KEYWORDS:
Classical Dichotomy, Structural Vector Auto Regression Model, Monetary Policy, Inflation Targeting
JOURNAL NAME:
Modern Economy,
Vol.2 No.5,
November
25,
2011
ABSTRACT: It is demonstrated through an Structural Vector Auto Regression (SVAR) model which distinguishes short and long term effects, that the monetary policy implemented in Mexico (1970-2008) has been successful in reducing inflation at the cost of stagnation, especially after 2002. Inflation Targeting is contradictory in itself because, while it is efficient in improving transparency and credibility of the monetary policy, it does not solve the structural causes of inflation and conversely, increases the financial costs of economic agents.