The notion that flexible exchange rates insulate a country from foreign shocks is well grounded in theory, from the … to headline consumer price inflation. However, it remains puzzling that policy makers are ready to forego stabilization …

inflation and output in opposite directions, their effects on economic activity are cushioned when monetary policy is … constrained. The burst of inflation from an oil price increase lowers real interest rates at the ZLB and stimulates the interest … rise in inflation can cause a GDP expansion …

We explore the dynamics of inflation, inflation expectations, and seigniorage-financed fiscal deficits in Mexico. To do … so, we estimate the model in Sargent, Williams, and Zha (2009) using Mexican CPI inflation data. This model features dual … expected inflation equilibriums and regime switching in the mean and variance of the fiscal deficit probability density …