Banco de México

Central Bank Signaling and Optimal Precautionary Credit Lines

We develop a DSGE model for a small open economy that incorporates a Flexible Credit Line (FCL) for extending foreign exchange reserves. The economy pays a commitment fee and benefits from a safeguarding mechanism that signals strong fundamentals the …

Enhancing Central Bank communication through Natural Language Processing: Mexico and the IMF

This paper derives principles for maximizing verbatim replication of key central bank messages by applying common Natural Language Processing (NLP) techniques. In particular, we lay out an application of the n-gram bag-of-words model to inform …