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Error Correction Exchange Rate Modeling Evidence for Mexico

Author

Listed:
  • Thomas M Fullerton Jr

    (University of Texas at El Paso)

  • Miwa Hattori

    (University of Texas)

  • Cuauhtemoc Calderon

    (Universidad Autonoma de Ciudad Juarez)

Abstract

A set of error correction models are proposed for the nominal exchange rate between the Mexican peso and the United States dollar. The basic theoretical frameworks utilize balance of payment and monetary model constructs. Empirical estimation results are fairly weak for both specifications irrespective of the interst rate variable selected. Although dynamic simulation properties of the equations are acceptable, in no case do they generate levels of accuracy that exceed that associated with a simple random walk.

Suggested Citation

  • Thomas M Fullerton Jr & Miwa Hattori & Cuauhtemoc Calderon, 2004. "Error Correction Exchange Rate Modeling Evidence for Mexico," International Finance 0406001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpif:0406001
    Note: Type of Document - doc; pages: 23
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    References listed on IDEAS

    as
    1. Thomas M Fullerton Jr & Roberto Tinajero, 2004. "Short-Run Price Dynamics in Mexico," Macroeconomics 0407027, University Library of Munich, Germany.
    2. Kim, Benjamin J. C. & Mo, Soowon, 1995. "Cointegration and the long-run forecast of exchange rates," Economics Letters, Elsevier, vol. 48(3-4), pages 353-359, June.
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    4. Hakkio, Craig S. & Rush, Mark, 1991. "Cointegration: how short is the long run?," Journal of International Money and Finance, Elsevier, vol. 10(4), pages 571-581, December.
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    Citations

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    Cited by:

    1. von Furstenberg, George M., 2006. "Mexico versus Canada: Stability benefits from making common currency with USD?," The North American Journal of Economics and Finance, Elsevier, vol. 17(1), pages 65-78, March.
    2. repec:arp:ijwpds:2016:p:69-74 is not listed on IDEAS
    3. Moosa, Imad & Burns, Kelly, 2014. "The unbeatable random walk in exchange rate forecasting: Reality or myth?," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 69-81.
    4. Daniel Garces-Diaz, 2004. "How Does the Monetary Model of Exchange Rate Determination Look When It Really Works?," Econometric Society 2004 North American Winter Meetings 60, Econometric Society.
    5. Otavio De Medeiros, 2005. "Order Flow and Exchange Rate Dynamics in Brazil," Finance 0503019, University Library of Munich, Germany.
    6. Fullerton, Th. & Lopez, J.J., 2005. "Error Correction Exchange Rate Modeling for Mexico: 1980 – 2001," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(3), pages 17-30.
    7. Thomas M. Fullerton, Jr. & Juan Carlos Vázquez Morales & Martha Patricia Barraza de Anda, 2011. "Dinamica de corto plazo del empleo en las maquiladoras de Reynosa, Tamaulipas," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 23-40, May.
    8. repec:ksp:journ2:v:4:y:2017:i:2:p:130-148 is not listed on IDEAS

    More about this item

    Keywords

    Mexico; Error Correction Modeling; Nominal Exchange Rates;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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