An empirical econometric model for the Mexican target rate and its application to determine the interest rate curve
DOI:
https://doi.org/10.29201/peipn.v17i35.92Keywords:
econometric modeling, monetary policy, term structure of interest rates, fixed income securitiesAbstract
The term structure of interest rates has been a field of intense research both from the theoretical point of view as well as from the purely applied point of view. We propose in this work a novel approach to model empirically the Target Rate that Banco de México sets as part of their monetary policy using a difference of two Poisson distributions in terms of public data: the monetary decisions taken by the Federal Reserve, the exchange rate, the inflation rate and its expectation, and the economic growth results and expectations. We apply later this rate to determine with excellent statistical significance, the short-term rates and then, using it together with the ratio of public spending without financial costs to GDP, the corresponding behavior of mid-term rates also with a very good significance.
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