Mexico: Determinants of the real exchange rate, 2001.01-2022.12.
We estimate the determinants (terms of trade, tradable to non-tradable price differentials, interest rate differentials, forward exchange rate and risk premium) of the Mexican bilateral real exchange rate (q) for the short and long run by using an Autoregressive Distributed Lag model (ARDL, Pesaran...
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| Format: | Article |
| Language: | English |
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Public Library of Science (PLoS)
2023-01-01
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| Series: | PLoS ONE |
| Online Access: | https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0286331&type=printable |
| _version_ | 1797377766084050944 |
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| author | Eduardo Loría Lorenzo Nalin |
| author_facet | Eduardo Loría Lorenzo Nalin |
| author_sort | Eduardo Loría |
| collection | DOAJ |
| description | We estimate the determinants (terms of trade, tradable to non-tradable price differentials, interest rate differentials, forward exchange rate and risk premium) of the Mexican bilateral real exchange rate (q) for the short and long run by using an Autoregressive Distributed Lag model (ARDL, Pesaran and Shin et al. (2001)) for Mexico (2001.01-2022.12). The inclusion of commercial and financial variables and finding empirical evidence of cointegration only for 2009.01-2022.12 are the main contributions. Our results indicate no cointegrating relationship either for the entire sample, or for 2001.01-2008.12. This finding has to do with the increasing international financialization process, after the 2008-2009 Great Financial Crisis. Using a double log model we find that: a) there is a strong short-run autoregressive effect of q of up to 4 lags (0.75), b) that the Balassa-Samuelson Effect is the largest in the model (-0.27 and -1.11 for short and long terms), c) the next most important factor is the terms of trade (-0.126 and -0.51, respectively), d) there are considerable, although lesser, effects of financial variables: forward exchange rate (0.0155 and 0.063, respectively) and risk-premium (0.009 and 0.036, respectively), e) there is a clear long-term trend of real depreciation expressed by the trend of 0.0020, which suggests that the PPP hypothesis applies. |
| first_indexed | 2024-03-08T19:57:13Z |
| format | Article |
| id | doaj.art-7f0d30815d8e47b3bc471c896f7e4579 |
| institution | Directory Open Access Journal |
| issn | 1932-6203 |
| language | English |
| last_indexed | 2024-03-08T19:57:13Z |
| publishDate | 2023-01-01 |
| publisher | Public Library of Science (PLoS) |
| record_format | Article |
| series | PLoS ONE |
| spelling | doaj.art-7f0d30815d8e47b3bc471c896f7e45792023-12-24T05:33:30ZengPublic Library of Science (PLoS)PLoS ONE1932-62032023-01-011812e028633110.1371/journal.pone.0286331Mexico: Determinants of the real exchange rate, 2001.01-2022.12.Eduardo LoríaLorenzo NalinWe estimate the determinants (terms of trade, tradable to non-tradable price differentials, interest rate differentials, forward exchange rate and risk premium) of the Mexican bilateral real exchange rate (q) for the short and long run by using an Autoregressive Distributed Lag model (ARDL, Pesaran and Shin et al. (2001)) for Mexico (2001.01-2022.12). The inclusion of commercial and financial variables and finding empirical evidence of cointegration only for 2009.01-2022.12 are the main contributions. Our results indicate no cointegrating relationship either for the entire sample, or for 2001.01-2008.12. This finding has to do with the increasing international financialization process, after the 2008-2009 Great Financial Crisis. Using a double log model we find that: a) there is a strong short-run autoregressive effect of q of up to 4 lags (0.75), b) that the Balassa-Samuelson Effect is the largest in the model (-0.27 and -1.11 for short and long terms), c) the next most important factor is the terms of trade (-0.126 and -0.51, respectively), d) there are considerable, although lesser, effects of financial variables: forward exchange rate (0.0155 and 0.063, respectively) and risk-premium (0.009 and 0.036, respectively), e) there is a clear long-term trend of real depreciation expressed by the trend of 0.0020, which suggests that the PPP hypothesis applies.https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0286331&type=printable |
| spellingShingle | Eduardo Loría Lorenzo Nalin Mexico: Determinants of the real exchange rate, 2001.01-2022.12. PLoS ONE |
| title | Mexico: Determinants of the real exchange rate, 2001.01-2022.12. |
| title_full | Mexico: Determinants of the real exchange rate, 2001.01-2022.12. |
| title_fullStr | Mexico: Determinants of the real exchange rate, 2001.01-2022.12. |
| title_full_unstemmed | Mexico: Determinants of the real exchange rate, 2001.01-2022.12. |
| title_short | Mexico: Determinants of the real exchange rate, 2001.01-2022.12. |
| title_sort | mexico determinants of the real exchange rate 2001 01 2022 12 |
| url | https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0286331&type=printable |
| work_keys_str_mv | AT eduardoloria mexicodeterminantsoftherealexchangerate200101202212 AT lorenzonalin mexicodeterminantsoftherealexchangerate200101202212 |