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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.

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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.

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