Effects of Volatility of the Exchange Rate on Inflation Expectations and Growth Prospects in Mexico (2002-2014)

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Guillermo Benavides
Isela Elizabeth Téllez-León
Francisco Venegas-Martínez

Abstract

This paper is aimed at assessing the impact of exchange rate volatility on inflation expectations and economic growth prospects in Mexico. In order to examine whether there is some degree of causality, we will be using standard multivariate volatility models. The goal of this research is to measure the direction of causality, that is, we will analyze, econometrically, potential relationships in both directions. The main finding is that there is only a statistically significant relationship between the exchange rate volatility and the volatility of inflation expectations, while no statistically significant association with growth prospects was found; these results provide important information that could be used in monetary policy design.

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How to Cite
Benavides, G., Téllez-León, I. E., & Venegas-Martínez, F. (2015). Effects of Volatility of the Exchange Rate on Inflation Expectations and Growth Prospects in Mexico (2002-2014). Ensayos Revista De Economía (Ensayos Journal of Economics), 34(2), 63–78. Retrieved from https://ensayos.uanl.mx/index.php/ensayos/article/view/18
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Author Biographies

Guillermo Benavides, EGADE Business School, Tecnológico de Monterrey, Campus Ciudad de México

EGADE Business School, Tecnológico de Monterrey, Campus Ciudad de México. Address: Av. Carlos Lazo No.100, Álvaro Obregón, Santa Fe, 01389 Ciudad de México, D.F., Mexico.

Isela Elizabeth Téllez-León, Escuela Superior de Economía, Instituto Politécnico Nacional.

Escuela Superior de Economía, Instituto Politécnico Nacional. Address: Plan de Agua Prieta 66, Plutarco Elías Calles, Miguel Hidalgo, 11350 Ciudad de México, D.F.

Francisco Venegas-Martínez, Escuela Superior de Economía, Instituto Politécnico Nacional

Escuela Superior de Economía, Instituto Politécnico Nacional. Address: Plan de Agua Prieta 66, Plutarco Elías Calles, Miguel Hidalgo, 11350 Ciudad de México, D.F

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