Mexico’s monetary policy framework under a floating exchange rate regime

This article examines Mexico’s monetary policy framework following the adoption of a floating exchange rate regime, evaluating its effectiveness in promoting economic stability and disinflation. The research focuses on the 1994–1995 exchange rate crisis, which forced Mexico to transition to this regime due to the shortcomings of a fixed exchange rate. Using a descriptive and empirical approach, the study analyzes the implementation of monetary and exchange rate policies since the crisis, with a focus on the independence of the Bank of Mexico and its role in price stabilization. The results indicate that, despite initial post-crisis volatility, the floating exchange rate regime has enabled rapid disinflation and sustained economic growth. The research suggests that the success of this regime lies in the combination of clear inflation targets, monetary rules, and discretionary adjustments, which has strengthened the credibility of the Bank of Mexico and facilitated economic adjustment in the face of external shocks. These conclusions have significant implications for economic policy, underscoring the importance of a coherent macroeconomic framework. (Abstract and audio: Department of Economic Publications)