Delivered comprehensive economic and financial research, directly informing the Central Bank’s monetary policy and exchange rate strategies. Developed econometric models tailored to a small open economy that drove policy recommendations and safeguarded economic stability.

This chapter describes Mexico’s experience with foreign exchange intervention since the free-floating exchange rate regime was adopted in December 1994. The first two sections describe the background of the different intervention mechanisms that have been used over time, along with the stated objectives of those interventions. The third section presents a set of analyses of the interventions’ effectiveness. The main takeaways from that section are that interventions with the objective to achieve a specific stock of international reserves have been very effective. However, it is difficult to assess the effectiveness of interventions if the objective is to temper foreign exchange volatility, because the central bank does not have the counterfactual case to compare what would have been the outcome without the intervention. Despite those difficulties, there is some statistical evidence to infer that the Bank of Mexico’s interventions in the foreign exchange market to temper volatility have been effective. The next sections describe how the size and timing of interventions were decided, as well as the communication policies that were followed. The last section provides final remarks on what has been learned in Mexico about foreign exchange interventions.