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Milkshake Prices, International Reserves, and the Mexican Peso

Author

Listed:
  • Thomas M Fullerton Jr

    (University of Texas at El Paso)

  • David Torres

    (El Paso Water Utilities)

Abstract

Menu prices from 13 international restaurant franchises that operate in both El Paso, Texas and Ciudad Juarez, Mexico 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 for the exchange rate. In addition to the multi-product price ratio, the empirical analysis also incorporates interst rate parity 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.

Suggested Citation

  • Thomas M Fullerton Jr & David Torres, 2005. "Milkshake Prices, International Reserves, and the Mexican Peso," International Finance 0508009, EconWPA.
  • Handle: RePEc:wpa:wuwpif:0508009 Note: Type of Document - doc; pages: 24
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    References listed on IDEAS

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    More about this item

    Keywords

    Purchasing Power Parity; Exchange Rates; border Economies;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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