Appendix for the PPP hypothesis and structural breaks: the case of Mexico

Gómez-Zaldívar, Manuel and Ventosa-Santaulària, Daniel and Wallace, Frederick (2012): Appendix for the PPP hypothesis and structural breaks: the case of Mexico.

Abstract

This appendix presents an extended explanation for our finding of mean reversion of the real exchange rate to a shifting mean using monthly data for Mexico, 1969-2010. Because such shifts coincide with trade liberalization in Mexico, we conclude that changes in the tradable/nontradable goods composition of the price index used in the empirical estimations caused the mean shifts.

• Item Type: MPRA Paper
• Language: English
• Keywords: Purchasing power parity, mean reversion, mean shifts, Mexico
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

References

Gómez-Zaldívar, M., Ventosa-Santaulària, D. and Wallace, F.H. The PPP hypothesis and structural breaks: the case of Mexico, forthcoming in Empirical Economics.