Abstract

REYES GUZMAN, Gerardo. Causes of the Depreciation of the Mexican Peso against the U.S. Dollar, 2014-2016. Norteamérica [online]. 2018, vol.13, n.1, pp.149-168. ISSN 2448-7228.  https://doi.org/10.20999/nam.2018.a005.

This article looks into the causes that triggered the severe depreciation of Mexico’s peso between 2014 and 2016. It focuses on the role of restrictive U.S. monetary policy in this, as well as on Donald Trump’s victory and his protectionist trade policy toward Mexico. The author uses the monetary approach to explain the short-term dynamics of depreciation to examine exchange rate performance under a flexible regime with a free flow of capital. The monthly data shown back up the logic of this model, and the author concludes that U.S. monetary and fiscal policies will continue to pressure Mexico’s currency, but not lead to recession.

Keywords : exchange rate depreciation; Federal Reserve monetary policy; U.S. trade policy; Donald Trump.

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