Abstract

RODRIGUEZ BENAVIDES, Domingo  and  PERROTINI HERNANDEZ, Ignacio. The Impact of Oil Price Shocks on Mexico’s Real Exchange Rate and Inflation. Econ: teor. práct [online]. 2018, n.spe4, pp.103-123. ISSN 2448-7481.  https://doi.org/10.24275/etypuam/ne/e042018/rodriguez.

In this paper the dynamic impact of international oil price shocks on Mexico’s real exchange rate and inflation rate in the period January 1996-November 2016 is dealt with. To that aim, we use a var model to estimate possibly integrated processes and a two-states Markov Switching VAR (MS-VAR) to assess the impact of those shocks on both inflation and the real exchange rate with a regime switching. Our robust Granger causality tests suggest that the real international oil price is exogenously determined vis-à-vis the domestic variables involved in the analysis. Furthermore, from the MS-VAR results we gather that inflation is uniquely affected by real exchange fluctuations -but not so by oil price variations- in the two estimated states, while oil price changes tend to affect the real exchange rate only in one of the estimated states and, through this channel, they possibly alter inflation.

Keywords : Oil Price Shocks; Asymmetric Impact, Markov regime-switch VAR; Mexico; C40; F62; Q43.