Abstract

CERNICHIARO REYNA, Christopher. Interest rate, demand, GDP, inflation, and expectations in a New Keynesian economy for Mexico. Anál. econ. [online]. 2023, vol.38, n.99, pp.7-22.  Epub Sep 25, 2023. ISSN 2448-6655.  https://doi.org/10.24275/uam/azc/dcsh/ae/2023v38n99/cernichiaro.

Using Mexican data from January 2002 to August 2017, this paper estimates a SVAR recursively identified through a model that satisfies New Keynesian core assumptions. Two key contributions are 1) evince that expected inflation is formed according to static expectations hypothesis; 2) suggest nominal rigidities presence, which reinforces the reasons to assess the Mexican economy through the New Keynesian Model; moreover, impulse response functions indicate: expected inflation influencing observed inflation; interest rate endogenously reacting to output and inflation, as to expected inflation decreases; higher interest rate entailing lower inflation and output.

Keywords : New Keynesian Model; static expectations; nominal rigidities; Structural Vector Autoregressive Model (SVAR).