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Disinflation and the December 1994 Devaluation in Mexico

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  • Carlos Ibarra

Abstract

This paper discusses the determinants of the Mexican peso devaluation of December 1994. An examination of basic economic data reveals the shortcomings of existing explanations based on either inconsistent macroeconomic policies or self-fulfilling prophecies. We argue in contrast that the devaluation was related to the exhaustion of the disinflationary programme launched in the late 1980s, and that the timing of policy change was critically influenced by a conflict between the inherited disinflationary stance and the economic goals of the administration taking office in December 1994. The analysis suggests that a prolonged period of real currency appreciation before the devaluation was made possible not only by the strong inflationary aversion of the authorities but by a series of positive shocks that reduced the appreciation's negative effects.

Suggested Citation

  • Carlos Ibarra, 1999. "Disinflation and the December 1994 Devaluation in Mexico," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(1), pages 55-69.
    • Handle: RePEc:taf:irapec:v:13:y:1999:i:1:p:55-69
    DOI: 10.1080/026921799101733
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    Cited by:

    1. Hoeven, Rolph van der. & Lübker, Malte., 2006. "Financial openness and employment the need for coherent international and national policies," ILO Working Papers 993887733402676, International Labour Organization.
    2. repec:ilo:ilowps:388773 is not listed on IDEAS
    3. Rolph van der Hoeven, 2010. "Labour Markets Trends, Financial Globalization and the current crisis in Developing Countries," Working Papers 99, United Nations, Department of Economics and Social Affairs.

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