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Investigación económica
Print version ISSN 0185-1667
Abstract
CEREZO GARCIA, Verónica; LOPEZ GONZALEZ, Teresa S. and LOPEZ HERRERA, Francisco. Economic growth and inflation in Mexico, 1993-2018: a linear or non-linear relationship?. Inv. Econ [online]. 2020, vol.79, n.311, pp.83-109. Epub Apr 21, 2020. ISSN 0185-1667. https://doi.org/10.22201/fe.01851667p.2020.311.72437.
The paper is aimed at assessing whether the relationship between Mexico’s economic growth and inflation has been linear or non-linear over the period 1993-2018. A non-linear dynamic autorregresive distributive lag model is elaborated to test both the null hypothesis of a linear relationship between the involved variables and the alternative hypothesis of a non-linear relationship. An empirical support for the the null hypothesis would imply that: 1) inflation is purely a monetary phenomenon (Friedman, 1968); 2) price stability, as achieved by means of the monetary policy framework of the new macroeconomic consensus, is both a necessary and sufficient condition for output growth acceleration and for overcoming the protracted stagnation of the Mexican economy, and 3) money is neutral. By contrast, if the empirical evidence confirms a non-linear relationship, both the null hypothesis and its ensuing implications would be rejected.
Keywords : Economic growth; econometric modeling; inflation; Mexico.