Crucial exchange rate parity. Evidence for Mexico |
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| Institution: | 1. CentER, Netspar, Tilburg University, Warandelaan 2, Tilburg, The Netherlands;2. Ghent University, W. Wilsonplein 5D, 9000 Ghent, Belgium;3. CentER, European Banking Center, Tilburg University, Warandelaan 2, Tilburg, The Netherlands;1. European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany;2. Narodowy Bank Polski, Financial Stability Department, ul. Swietokrzyska 11/21, 00-919 Warsaw, Poland;3. Warsaw School of Economics, Institute of Econometrics, ul. Madalińskiego 6/8, 02-513 Warsaw, Poland;1. Department of General Surgery, The Affiliated People’s Hospital of Jiangsu University, Zhenjiang, Jiangsu 212002, China;2. Department of General Surgery, Nanjing Lishui District People’s Hospital, Nanjing, Jiangsu 211200, China;3. School of Medicine, Jiangsu University, Zhenjiang, Jiangsu 212013, China;4. Department of General Surgery, Kunshan Hospital, Affiliated to Jiangsu University, Kunshan, Jiangsu 215300, China;5. Department of General surgery, Xuzhou Central Hospital, Xuzhou, Jiangsu 221000, China;6. Department of Vascular surgery, the Affiliated Hospital of Jiangsu University, Zhenjiang, Jiangsu 212002, China;7. Department of Respiratory medicine, the Affiliated People’s Hospital of Jiangsu University, Zhenjiang, Jiangsu 212002, China |
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| Abstract: | Through a structural vector error correction model, one restricted cointegrating relationship for monthly data (1999.01–2012.04) was found between three exchange parities of great relevance for the Mexican economy: US Dollar–Euro, Mexican Peso–US Dollar, and Mexican Peso–Euro. The data's structure revealed endogeneity of the last one, but the first is the one that adjusts the long run (cointegrating) relation. A unitary elasticity of MxP–Euro parity to the other two parities was found, which validates PPP condition in absolute terms. These results are crucial to analyze the possible long run exchange effects on the Mexican real and financial variables because of the possible intensification of the Euro crisis and the currency war. |
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