ABSTRACT
This chapter demonstrates the increasing ineffectiveness of Mexico’s exchange rate policy with a global, financialised currency in light of an export-driven accumulation model strongly impacted by exchange rate volatility. It analyses Mexico’s exchange-rate policy since the inauguration of the free-floating regime and the establishment of different forms of intervention into the foreign exchange (FOREX) market. Mexico’s economy was subject to strong external shocks that created great uncertainty and exchange rate volatility, putting monetary policy in a straitjacket and reducing the margin for fiscal policy freedom. Monetary policy loses the autonomy to impose order in the FOREX market and retain capital. In the first years of the twenty-first century, Mexico was characterised by a relatively low, controlled fiscal deficit, an inflation-targeting monetary policy and a free-floating exchange rate regime; all of this provided national and international investors with certainty.
