Abstract

LORIA, Eduardo. Mexico: Restricted Economic Growth and the Exchange Rate, 1950-2014. Prob. Des [online]. 2016, vol.47, n.186, pp.133-160. ISSN 0301-7036.

Recent literature has empirically demonstrated that the real exchange rate is essential to explaining the economic evolution of developing countries. It has been empirically proven that the anti-inflation exchange rate policy implemented systematically in Mexico has constituted a major restriction on the country’s economic growth, a restriction that has persisted throughout this entire time period, even through different monetary and exchange rate regimes. This paper estimates an SVAR (1950-2014) that shows how the continuous appreciation of the real exchange rate has curbed Mexico’s economic growth capacity and had an impact on other macroeconomic balances. This alone could be considered a highly potent structural macroeconomic reform.

Keywords : Economic growth; exchange rate; SVAR; monetary policy.

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