Abstract

GALINDO, Luis Miguel  and  GUERRERO, Carlos. The Taylor Rule for Mexico: An Econometric Analysis. Inv. Econ [online]. 2003, vol.62, n.246, pp.149-167. ISSN 0185-1667.

The objective of this article is to analyze from an econometric perspective the validity of the Taylor rule in the case of the Mexican economy. The results obtained indicate that developing an econometric model with the appropriate statistical characteristics is possible, but only with important variants from the original Taylor rule. Thus, it can be argued that simple rules satisfactorily describe the behavior of monetary policy in Mexico. What this model indicates is that the nominal interest rate responds to the inflation rate and to the interest rate with a delay while the deviations from the potential product are not statistically significant. This reflects that the Central Bank of Mexico defines its policies exclusively by the behavior of the price level without any systematic consideration to the effects on the deviations of the product.

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