IDEAS home Printed from
   My bibliography  Save this paper

Impulse Response Functions Analysis: An application to the Exchange Rate Pass-Through in Mexico


  • Sylvia Beatriz Guillermo Peon

    () (Benemérita Universidad Autónoma de Puebla)

  • Martin Rodriguez Brindis

    (Universidad La Salle, campus Oaxaca)


The paper aims at analyzing the Exchange Rate Pass-Through mechanism for the Mexican economy and is carried out using STATA under two time series frameworks. The first framework is a recursive structural VAR (SVAR) model which, unlike the traditional VAR model, allows us to impose additional restrictions on the contemporaneous and lagged matrices of coefficients. The second is a VEC approach, which considers the possibility of valid cointegrating relationships and allows to incorporate the deviations from the long run equilibrium (cointegrating equations) as explanatory variables when modeling the short run behavior of the variables. Both frameworks aim at the estimation of impulse-response-functions (IRFs) as a tool to analyze the degree and timing of the effect of exchange rate changes on domestic prices using impulse-response functions (IRFs). The recursive SVAR approach allows us to estimate the structural IRFs while the VEC approach uses the Cholesky decomposition of the white noise variance-covariance matrix by imposing some necessary restrictions so that causal interpretation of the simple IRFs is possible. If cointegration exists, estimation of the IRFs provides a tool to identify when the effect of a shock to the exchange rate is transitory and when is permanent.

Suggested Citation

  • Sylvia Beatriz Guillermo Peon & Martin Rodriguez Brindis, 2013. "Impulse Response Functions Analysis: An application to the Exchange Rate Pass-Through in Mexico," 2013 Stata Conference 17, Stata Users Group.
  • Handle: RePEc:boc:norl13:17

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:norl13:17. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.