Economics & Finance

Inflation Targeting and Policy Rules
The Case of Mexico, 2001–2012

Oscar Rodriguez Medina
Elias Alvarado Laguna, PhD

Inflation Targeting and Policy Rules

Published. Available now.
Pub Date: April 2016
Hardback Price: $129.95 US
Hard ISBN: 9781771882682
E-Book ISBN: 9781771882590
Pages: 210pp w index
Binding Type: hardback
Notes: 14 b/w illustrations

“From the three pillars of contemporary monetary economics: 1) hypothesis of rational expectations, 2) policy rules, and 3) inflation targeting framework. The authors Oscar Rodríguez and Elias Alvarado expose with a clear and simple analytical vision how the Mexican Bank Central has conducted its monetary policy in the last years specially before and after of subprime crisis. Therefore, this book should be required reading to understand the process of design and implementation of a monetary policy with the aim of a low and stable inflation to ensure the growth of the Mexican economy.”
—Javier Galán Figueroa, PhD, Graduate School of Economics, Faculty of Economy, National Autonomous University of Mexico (UNAM)

“Oscar Rodriguez Medina and Dr. Elias Alvarado Lagunas are well-documented and expert professors in monetary theory. In their book, Inflation Targeting and Policy Rules: The Case of Mexico, 2001–2012, they begin with a serious and a rigorous theoretical analysis and then offer empirical evidence, emphasizing the case of emerging countries and how this kind of countries is most vulnerable to global issues as financial crises. Also the book explains how governments have implemented the inflation targeting approach and use monetary policy rules as a regulatory policy and price stabilization. I would recommend publication.”
—Dr. Mario Sánchez Silva, Director, National Polytechnic Institute, Mexico

"The relevance of this book is based on that it is a theoretical-practical guide in the way in which, nowadays, the majority of the world’s central banks manage their monetary policy. The design of this book, even though it requires knowledge of technical terms, is easy to read because it was written carefully in detail. It emphasizes the case of developing countries whose transition to the use of the scheme of inflation targets and monetary policy rules is recent or in process, without neglecting the review of the exchange rate variable in monetary policy decision-making. . . . The authors describe the efforts of countries, such as Mexico, to use the interest rate as a nominal anchor of the economy. However, the recent international economic circumstances, such as the decrease in petroleum prices, and the impact on public finances have caused the Banco de Mèxico to change its objective for the interbank interest rate, which is an evidence that it is possible that the volatility of the exchange rate negatively influence inflation expectations. It has been a pleasure to review this work, and I recommend the utilization of this guide for advanced macroeconomics courses, both at undergraduate and graduate levels, because it represents an interesting empirical and theoretical reference frame of the monetary policy conduct in our country.”
—Mario César Davila Aguirre, PhD, Coordinator of the Business Incubator and Social Entrepreneurship Program, Autonomous University of New Leon, Mexico

Inflation Targeting and Policy Rules is an essential book for understanding how Mexico’s monetary policy has been evolving and functioning, from the beginning of the century to recent, highlighting the doctrine of policy rules and focusing on inflation targeting, both fundamental elements necessary to comprehend the operation of the main central banks of the world.

The book is valuable because of its theoretical and empirical treatment applied to the policy rules and to inflation targeting, which range from their origin, criticism, development, controversies, evolution, and evaluation of the subject. It is accessible reading for anyone interested in approaching the subject of the monetary policy of a developing country. It is, without a doubt, a relevant addition to the bank of knowledge on the monetary reality of any country that has recently adopted inflation targeting and use a policy rule based on interest rate as an instrument, as well as the flexible currency exchange regimen. It will become an essential source for future investigations in Mexico and other countries in similar situations.

The book
The book
• explains the analytical framework that consists of developing conditional probability as essential for rational expectations hypothesis
• presents a synthetic but detailed exposure of the approach of inflation targeting, especially based on the consensus among monetary authorities in the pursuit of low and stable inflation, detailing some of the most relevant experiences as well as their main objections
• reviews the process origin-evolution of monetary policy rules,
• assesses the actions of the Banco de México in terms of the implementation of the inflation targeting approach
• summarizes the highlights of Mexico’s monetary policy and offers conclusions

The book is suitable for macroeconomics courses and courses dealing with developing economies as well as for financial professionals seeking recent and trends.

1. Analytic Framework
2. Approach to Inflation Targeting (EBI)
3. Policy Rules
4. Mexico: Approach of Inflation Targeting 2001–2012
5. Mexico: Policy Rules, 2001–2012
6. The De-Linking of the Variable Exchange Rate as a Nominal Anchor of the Economy in the Conduct of Monetary Policy In Mexico

About the Authors / Editors:
Oscar Rodriguez Medina
Specialist in Monetary and Financial Economics

Oscar Rodriguez Medina is a specialist in monetary and financial economics and holds a master’s degree in economics and bachelor of economics from the Universidad Nacional Autónoma de México (UNAM). He is also a PhD student in economics at the Instituto de Investigaciones Economicas in Mexico City. He has been a lecturer in the faculty of economics and a research assistant in the Institute of Economic Reseach (IIEc) of the UNAM. His particular area of research is monetary theory and policy.

Elias Alvarado Laguna, PhD
Facultad de Contaduría Pública y Administración, Universidad Autónoma de Nuevo León (UANL), Mexico

Elias Alvarado Laguna, PhD, is currently a lecturer and researcher with the Facultad de Contaduría Pública y Administración at the Universidad Autónoma de Nuevo León (UANL), Mexico. His areas of specialilzation include development economics and public management, as well as regional and local development. Dr. Lagunas received his social sciences PhD in sustainable development from the Universidad Autónoma de Nuevo León (UANL) and his master’s degree in industrial economy by the UANL. He is a member of Sistema Nacional de Investigadores (SNI).

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