Mexico

Mexico had a long period of financial evolution with some exchange rate management plus increasingly active monetary policy, before embarking in 2001 on inflation targeting which became more organised and effective through the 2000s.

Years Targets and attainment Classification
1974-6 fixed exchange rate (fixed since 1954) in context of heavily regulated monetary system but open foreign exchange market with no capital controls full exchange rate targeting FERT
1977-2000 exchange rate floating, initially more managed (with dual exchange rate market 1982-91), but freer float from 1995; monetary policy instruments evolving from central bank-set interest rates, reserve requirements and occasional direct credit controls, with recurring fiscal dominance, to open market operations in short and medium term government securities; recurring periods of exchange rate weakness and capital flight, especially 1982 (which precipitated nationalisation, reform and privatisation of commercial banks) and 1994; central bank more independent from 1993 loosely structured discretion LSD
2001-3 converging inflation targets nearly missed twice in three years; targeting operated through (longstanding) control of banks’ settlement balances rather than policy rate; central bank communication weak, e.g. no inflation forecasts published; ‘rules-based’ mechanism from 2003 to provide for international reserve accumulation without distortions to forex market loose converging inflation targeting LCIT
2004-10 stable inflation targets missed 2008, 2009 (with some upward drift of inflation expectations), and nearly missed 2004, 2010; inflation forecasts published from 2007 and policy rate becomes main instrument in 2008 loose inflation targeting LIT
2011-14 inflation targets hit each year, inflation targeting framework more complete and comparable to elsewhere full inflation targeting FIT

Selected IMF references: RED 1980 pp34-41; RED 1983 pp70-3; RED 1990 pp34-5; RED 1995 chapter I; SI 2000 chapter VI; SI 2002 pp94-6; SR 2003 pp9, 12, 22-4, 30; SR 2006 p4; SR 2009 p18; SR 2011 p17.

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