Quasi purchasing power parity: Structural change in the Mexican peso/US dollar real exchange rate
DOI:
https://doi.org/10.24201/ee.v18i2.183Keywords:
exchange-rate, mexican peso, american dollar, purchasing powerAbstract
This paper analyzes whether the real exchange-rate of the Mexican peso/US dollar revert to a long-run equilibrium value, and whether this value is unique. We use a method for testing stationarity, that allows for an unknown number of structural breaks in the level of the series. Using a long span of annual data covering the period 1925-1994, our results provide evidence favoring long-run Quasi-Purchasing Power Parity. In particular, we find that the real peso/dollar exchange rate has fluctuated stationarily around a 70 year long-run level, perturbed by a series of events, both domestic and external, in or around 1981.
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