Sterilized Interventions in an Inflation Targeting Regime: Two Instruments to Control Inflation. The Mexican experience, 1996-2013

This paper investigates the effectiveness of Banco de Mexico interventions to move the exchange rate in its desired direction. We use a time series model and an event study methodology to analyze the relationship between the exchange rate and the interventions. We find that interventions were effective in the period under study. Banco de Mexico almost totally sterilizes its exchange rate interventions, which means that sterilization is an independent instrument of Banco de Mexico monetary policy.