Low monetisation of fiscal deficits was necessary in achieving stable inflation in Mexico, a team of researchers from the Mexican central bank say.
In the paper, the researchers analyse the interaction between inflation, inflation expectations and fiscal deficits in Mexico from the period of 1969–2017.
The results show the fiscal deficit is “central in explaining” the behaviour of inflation in Mexico. The authors find the two variables move in tandem across the sample period.
The paper also