Using a vector error correction model I test whether shocks in the funding liquidity conditions in the U.S. and Europe separately explain deviations from the covered interest parity (CIP) between the U.S. Dollar and the Mexican Peso. I find that: (1) Apparent deviations from the CIP seem to be...

In this paper we use data from Mexico to identify Dornbusch's (1976) exchange rate overshooting hypothesis. We specify and estimate a structural cointegrated VAR that considers explicitly the presence of a set of long-run theoretical relations on macroeconomic variables (a purchasing power...

In this paper we use data from Mexico to identify Dornbusch's (1976) exchange rate overshooting hypothesis. We specify and estimate a structural cointegrated VAR that considers explicitly the presence of a set of long-run theoretical relations on macroeconomic variables (a purchasing power...