Real Exchange Rate Response to Capital Flows in Mexico: An Empirical Analysis
IMF Working Papers, June 1, 2000
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- Real Exchange Rate Response to Capital Flows in Mexico: An Empirical Analysis
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Bibliographic details
- Authors: Marcelo P. Dabós, V. Hugo Juan-Ramon
- Published: June 1, 2000
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451853094.001
Main findings
- There is a long-run relationship between the real exchange rate and:
- capital inflows,
- the external terms of trade, and
- productivity in the manufacturing sector.
- A once-and-for-all unit increase in the ratio of quarterly capital inflow to quarterly (annualized) GDP causes a long-run real appreciation of the peso of about 12 percent.
- The analysis reveals a structural break in 1995, which coincides with the change to a floating exchange rate arrangement.
- The peso was estimated to be overvalued in real terms on the eve of the end–1994 crisis in the range of 12 to 25 percent.
Empirical approach and technical terms
- Estimation framework referenced: equilibrium-correction model (EqCM estimation).
- Key variables and concepts used:
- capital flows, capital inflow, Capital inflows,
- coefficient of the equilibrium correction term,
- exchange rate liberalization, exchange rate response,
- Export real exchange rate, external terms of trade, terms of trade index,
- income effect, natural logarithm, nominal exchange rate,
- productivity, productivity index, Real exchange rates, Real exports,
- regression estimate, response to capital.
- Study length: 33 pages.
Publication and metadata
- Authors: Marcelo P. Dabós, V. Hugo Juan-Ramon
- Publication date: June 1, 2000
- Series: Working Paper No. 2000/108
- Issue: 108
- Volume: 2000
- DOI: https://doi.org/10.5089/9781451853094.001
- ISBN: 9781451853094
- ISSN: 1018-5941
- Stock No: WPIEA1082000
IMF Working Paper — "Real Exchange Rate Response to Capital Flows in Mexico: An Empirical Analysis" by Marcelo P. Dabós and V. Hugo Juan-Ramon, June 1, 2000.
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- Real Exchange Rate Response to Capital Flows in Mexico: An Empirical Analysis - WP/00/108