Purchasing power parity in Mexico: a historical note

Wallace, Frederick (2009): Purchasing power parity in Mexico: a historical note.

Abstract

Purchasing power parity has been the subject of many empirical studies. Much of this work has focused on recent history in developed countries. This paper reports results of tests for nonlinear, mean reversion of the real exchange rate for a less-developed country, Mexico, using a previously unexploited data set of monthly observations for 1930-1960. The test results provide weak support for PPP.

• Item Type: MPRA Paper
• Language: English
• Keywords: purchasing power parity; nonlinear unit root
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C20 - General; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

References

Cárdenas, E. (1987) La Industrialización Mexicana Durante la Gran Depresión, El Colegio de México, México, D.F.

Cárdenas, E. (1994) La Hacienda Pública y la Política Económica 1929-1958; El Colegio de México, Fideicomiso Historia de las Américas, y Fondo de Cultura Económica, México, D.F.

Federal Reserve Bank of St. Louis (2009) Economic Data-Fred, http://research.stlouisfed.org/fred2/ .

Instituto Nacional de Estadística y Geografía (2000) Estadísticas Históricas de México, Aguascalientes, México.

Lopez, C.; Murray, C.J.; and Papell, D.H. (2005) State of the art unit root tests and purchasing power parity, Journal of Money, Credit, and Banking, 37, 361-369.

Haber, S. (1989) Industry and Underdevelopment: The Industrialization of Mexico 1890-1940.

Juvenal, L. and Taylor, M.P. (2008) Threshold adjustment of deviations from the law of one price, Studies in Nonlinear Dynamics & Econometrics, 12, 1-44.

Papell, D. and Prodan, R. (2006) Additional evidence of long-run purchasing power parity with restricted structural change, Journal of Money, Credit, and Banking, 38, 1329-1349.

Pérez-Rodríguez, J.V., Ledesma-Rodríguez, F., and Torra-Porras, S. (2009) Purchasing power parity and nonlinear adjustment, Applied Economics Letters, 16, 35-38.

Sarno, L. and Taylor, M.P. (2002) The Economics of Exchange Rates Cambridge University Press, Cambridge, U.K.

Sarno, L., Taylor, M.P., and Chowdhury, I. (2004) Nonlinear dynamics in deviations from the law of one price: A broad-based empirical study, Journal of International Money and Finance, 23, 1-25.

Sollis, R., Leybourne, S., and Newbold, P. (2002) Tests for symmetric and asymmetric nonlinear mean reversion in real exchange rates, Journal of Money, Credit, and Banking, 34, 686-700.

Taylor, A. (2001) Potential pitfalls for the purchasing-power-parity puzzle? Sampling and specification biases in the mean-reversion tests of the law of one price, Econometrica, 69, 473-498.

Taylor, A. T. (2002) A century of purchasing-power parity, Review of Economics and Statistics, 84, 139-150.

Taylor, A. T. and Taylor, M.P. (2004) The purchasing power parity debate, Journal of Economic Perspectives, 18, 135-158.

Wallace, F.H. and Shelley, G.L. (2006) An alternative test of purchasing power parity, Economics Letters, 92, 177-183.