Menu prices from 13 international restaurant franchises that operate in both El Paso and Ciudad Juarez are utilized to examine the behavior over time of the peso/dollar exchange rate. Parametric and non-parametric tests indicate that the price ratio alone provides a biased estimator of the exchange rate. In addition to the multi-product price ratio, the empirical analysis also incorporates interst rate prity and balance of payment variables. The combination of unique microeconomic sample data with national macroeconomic variables illustrates one manner in which border economies provide information regarding the interplay of financial markets between Mexico and the United States.
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
434.
Length: Date of creation: 2005 Date of revision:
2005 Publication status: Published in Frontera Norte 33.17(2006): pp. 53-76 Handle: RePEc:pra:mprapa:434
Find related papers by JEL classification: R15 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods F31 - International Economics - - International Finance - - - Foreign Exchange
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