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This appendix presents an extended explanation for our finding of mean reversion of the real exchange rate to a shifting mean using monthly data for Mexico, 1969-2010. Because such shifts coincide with trade liberalization in Mexico, we conclude that changes in the tradable/nontradable goods...
Persistent link: https://www.econbiz.de/10011108482
We show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, introduces a bias against finding evidence of PPP. The bias is illustrated using unit root tests applied to bilateral real rates.
Persistent link: https://www.econbiz.de/10011109554
We test the purchasing power parity hypothesis for the Mexican peso/US dollar real exchange rate using monthly data for 1969–2010. Results suggest that the real exchange rate reverts to a changing mean. These mean shifts can be explained by liberalization policies implemented during the 1980s...
Persistent link: https://www.econbiz.de/10010994451
We show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, is subject to a problem that biases tests against finding evidence of PPP. The problem is illustrated using Astorga´s data on six Latin American countries.
Persistent link: https://www.econbiz.de/10010747088
We study whether there is a long-run relationship between Mexican current account (CA) revenues and expenditures. Our results show that evidence in favor of this claim is drawn only when (at least) three structural break levels are allowed. The CA therefore behaves as a broken-mean stationary...
Persistent link: https://www.econbiz.de/10010835852
The relation between inflation, M1 money, and real GDP in Mexico is examined using annual data from 1944 to 1991. When investigating the relation between changes in inflation and real GDP growth it is found that it is important to separate the changes in inflation into predictable and...
Persistent link: https://www.econbiz.de/10005468034
We make use of a data set that is both long span and high frequency to test for purchasing power parity while allowing for a structural shift in the volatility of the Mexico-US bilateral real exchange rate. The Kim, Leybourne and Newbold (2002) unit root test, robust to changes in the innovation...
Persistent link: https://www.econbiz.de/10010823224
Persistent link: https://www.econbiz.de/10010897759
Persistent link: https://www.econbiz.de/10010883901
Im et al. (Unpublished working paper, <CitationRef CitationID="CR11">2008</CitationRef>) develop cointegration tests using stationary instrumental variables. Their tests avoid the need to simulate critical values for the cointegration estimations, especially problematic in the presence of a nuisance parameter. Likewise, bootstrapping...</citationref>
Persistent link: https://www.econbiz.de/10010992906