Analysis of output fluctuations in Mexico: application of the Romer model and the Taylor rule
by Yu Hsing
Global Business and Economics Review (GBER), Vol. 7, No. 4, 2005

Abstract: Extending the Romer (2000) model and the Taylor (1993; 1998; 1999) rule, this paper derives theoretical relationships between equilibrium output in Mexico and a change in the exchange rate, stock values, or the world interest rate. Empirical results show that more deficit spending, higher stock prices, real peso appreciation, a lower federal funds rate, more world output, and lower expected inflation would help raise the Mexican output. The central bank plays a major role in determining the directions and magnitude of these impacts.

Online publication date: Wed, 30-Nov-2005

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