The paper addresses Mexico's experience with inflation targeting, which became operational in the aftermath of the 1994/95 tequila crisis. Using VAR econometrics over the post-1980 time series data, we find that monetary policy of the Banco de Mexico was asymmetric with respect to exchange rate...

There has been a major shift within macroeconomic policy over the past two decades or so in terms of the relative importance given to monetary policy and to fiscal policy in both policy and theoretical terms. The former has gained considerably in importance, with the latter being rarely...

This study shows that strong interest rate expectations can have a massive short-term impact on counterparties' bidding behavior if certain conditions for monetary policy operations are present. This increases the probability of an undesirable reaction of potentially more volatile short-term...

We develop a simple model of an economy in which domestic agents borrow and lend from each other in either home or foreign currency. Nominal wage rigidity implies that portfolios are chosen to offset the real variability of labor income. Portfolio choices, in turn, affect the potency of monetary...

Inflation targeting is a statement about the objective of central bank policy and not about operating procedures. Its success depends not only on the actions of the central bank, but requires a broad consensus concerning the proper role of monetary policy in the economy. It also requires the...

The purpose of the paper is to discuss how monetary policy decisions made by the board or monetary policy committee of a central bank can be implemented. It distinguishes between the polar extremes of direct and indirect methods of implementation, and explains why indirect methods are generally...

In many countries two decision-making institutions, the government and the central bank, manage fiscal and monetary policy separately. Such decentralization can lead to a change in the optimal inflation-output trade-off. In fact lack of cooperation can result in a change in the position of the...

The development of the seven main OECD economies during the 1970s and 1980s is discussed. Subsequently, wage equations of the error-correction type for the seven largest OECD economies are estimated. The hypothesis of real wage rigidity cannot be rejected for the French, German, Italian and...