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Finding International Fisher effect to determine the exchange rate through the purchasing power parity theory: the case of Mexico during the period 1996-2012

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  • Andrea SALAS ORTIZ
  • Rodrigo GOMEZ MONGE

Abstract

Nowadays, the exchange rate is one of the most relevant issues of modern macroeconomics. Its importance is essential because of its impact on nominal and real variables. Our central question is whether the nominal interest differentials might be used to anticipate currency changes specially the Mexican-US exchange rate. So the purpose of this paper is to describe the theory of the international fisher effect and test its empirical validity for the Mexican case.

Suggested Citation

  • Andrea SALAS ORTIZ & Rodrigo GOMEZ MONGE, 2015. "Finding International Fisher effect to determine the exchange rate through the purchasing power parity theory: the case of Mexico during the period 1996-2012," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 15(1), pages 97-110.
    • Handle: RePEc:eaa:aeinde:v:15:y:2015:i:1_8
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    References listed on IDEAS

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    1. Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-282, June.
    2. Coppock, Lee & Poitras, Marc, 2000. "Evaluating the Fisher effect in long-term cross-country averages," International Review of Economics & Finance, Elsevier, vol. 9(2), pages 181-192.
    3. Ian H Giddy & Gunter Dufey, 1975. "The Random Behavior of the Flexible Exchange Rates: Implications for Forecasting," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 6(1), pages 1-32, March.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. 49. Actividades de la Asociacion Euro-Americana con América Latina: Años 2011-2022
      by MCG Blogs de Economía in Asociación de Estudios Euro-Americanos: Desarrollo internacional de América, Europa y otras áreas on 2022-10-03 12:12:00

    Citations

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    Cited by:

    1. Christopher E.S. WARBURTON, 2018. "Covered Interest Parity And Frictions In Currency And Money Markets: Analysis Of British Pound And Dollar For The Period 1999-2006," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 18(1), pages 55-72.

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    More about this item

    Keywords

    Exchange rate; nominal interest rate; inflation rate; expectations.;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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