Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/240663
Authors: 
Carrillo, Julio A.
Elizondo, Rocio
Rodríguez-Pérez, Cid Alonso
Roldán-Peña, Jessica
Year of Publication: 
2018
Series/Report no.: 
Working Papers No. 2018-22
Publisher: 
Banco de México, Ciudad de México
Abstract: 
Evidence suggests that potential growth and the neutral rate co-move in advanced economies. In contrast, this co-movement is not observed in emerging economies. We argue that capital flows may explain this behavior. We focus on Mexico, a benchmark emerging economy, and find that capital inflows may account for a temporary reduction in the Mexican neutral rate after the global financial crisis. These inflows surged during the implementation of unconventional monetary policies in advanced economies. In turn, low-frequency changes in the neutral rate may be attributed to increasing domestic savings, demographics, and a decreasing global long-run real interest rate. These results are largely consistent with other studies showing that the neutral rate has decreased in the last 25 years in advanced and emerging economies.
Subjects: 
Neutral rate of interest
emerging market economies
transitory and structural factors
JEL: 
C10
E43
E52
Document Type: 
Working Paper
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