Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7345662 | Economía Informa | 2013 | 28 Pages |
Abstract
The free-floating regime that has been enforced since December 1994 in Mexico, was portrayed as a better outcome for the economy, however the goals of the authorities were similar to the banded regime from 1991 to 1994. In fact, the Central Bank and Exchange Commission still do not permit the currency to float. Furthermore, an active monetary intervention prevents the currency from being determined by the market. Rather, the central bank and the Exchange Commission have been using the two main tools -interest rates and reserves- to influence in the exchange rate determination. These organizations are working to maintain stable exchange rates in order to fluctuations or changes in domestic prices. The foreign exchange markets in the modern era have been characterized for showing an increasing number of exchange transactions primarily for financial reasons, overcoming the volume of trade transactions. Mexico has made no exception. Given its nature as an open economy, the capital inflows have become the dominant force in setting exchange rates, and it has had a direct impact in a stronger nominal exchange rate overvaluation, placing the national economy in a high vulnerable environment.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Daniel Alberto Pérez Ruiz,