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Structural Volatility in Mexico: A Policy Report

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  • Ricardo J. Caballero

Abstract

This paper surveys Mexico`s economic weaknesses and provides related policy recommendations. Current problems include weak international financial links and external conditions, a recurrent credit crunch and financial underdevelopment problem, with particularly fragile banks, a weak fiscal situation, due to extreme vulnerability to internal and external shocks, and a latent monetary policy credibility problem. The paper`s policy recommendations include improving external financial links, reducing direct exposure to external shocks, accelerating domestic financial deepening and strengthening existing arrangements, reducing public accounts exposure to internal and external shocks, and stabilizing very high and very low frequency movements in the nominal exchange rate.

Suggested Citation

  • Ricardo J. Caballero, 2000. "Structural Volatility in Mexico: A Policy Report," Research Department Publications 4209, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:4209
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    References listed on IDEAS

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    1. Gavin, Michael & Hausmann, Ricardo, 1996. "The Roots of Banking Crises: The Macroeconomic Context," IDB Publications (Working Papers) 6067, Inter-American Development Bank.
    2. Ricardo Caballero & Arvind Krishnamurthy, 1998. "Emerging Market Crises: An Asset Markets Perspective," Working papers 98-18, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. repec:idb:wpaper:318 is not listed on IDEAS
    4. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    5. Ricardo J. Caballero, 2000. "Structural Volatility in Argentina: A Policy Report," Research Department Publications 4213, Inter-American Development Bank, Research Department.
    6. Blommestein, Hans J., 1997. "Institutional Investors, Pension Reform and Emerging Securities Markets," IDB Publications (Working Papers) 6094, Inter-American Development Bank.
    7. Gelos, R. Gaston & Werner, Alejandro M., 2002. "Financial liberalization, credit constraints, and collateral: investment in the Mexican manufacturing sector," Journal of Development Economics, Elsevier, vol. 67(1), pages 1-27, February.
    8. Michael Gavin & Ricardo Hausmann, 1996. "The Roots of Banking Crises: The Macroeconomic Context," Research Department Publications 4026, Inter-American Development Bank, Research Department.
    9. Peter M. Garber, 1998. "Derivatives in International Capital Flows," NBER Working Papers 6623, National Bureau of Economic Research, Inc.
    10. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 253-316.
    11. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1994. "Capital Inflows to Latin America: The 1970s and 1990s," MPRA Paper 8196, University Library of Munich, Germany.
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    Cited by:

    1. Ricardo J.Caballero, 2001. "Macroeconomic volatility in Latin America: a view and three case studies," Estudios de Economia, University of Chile, Department of Economics, vol. 28(1 Year 20), pages 5-52, June.
    2. Caballero, Ricardo J., 2000. "Structural Volatility in Chile: A Policy Report," IDB Publications (Working Papers) 1323, Inter-American Development Bank.
    3. Ricardo J. Caballero, 2000. "Inestabilidad estructural en Chile: informe de políticas," Research Department Publications 4212, Inter-American Development Bank, Research Department.

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