The Experience with a Floating Exchange Rate Regime

This chapter examines the experience of Mexico with a floating exchange rate regime. It reviews Mexico's problematic transition to the floating exchange rate regime during 1994–95 and describe how monetary and exchange rate policy have been conducted under this regime. This chapter analyzes the behavior of inflation, exchange rates and other financial and real variables during the float and suggests that the floating exchange rate regime in Mexico has performed better than conventional wisdom would have led us to believe.