Random Walks and Half-Lives in Chilean and Mexican Peso Real Exchange Rates: 1980 - 2003

Authors

Andre V. Mollick, The University of Texas Rio Grande ValleyFollow

Document Type

Article

Publication Date

5-2007

Abstract

Several papers have shown that high-inflation contributes to mean reversion in real exchange rates. This paper studies the Chilean peso (CLP) and Mexican peso (MXN) real exchange rates over 1980-2003. Three datasets are used: two with quarterly and monthly bilateral data (against the U.S. dollar) with consumer and producer price indices and another with monthly real effective rate exchange rates (REER). Unit root tests do not reject the root in levels for both currencies. Half-lives, however, contrast markedly: at 5 years or infinity for the Chilean peso and between 1 and 3 years for the Mexican peso. These findings suggest that the sharp depreciations in MXN and Mexico's relatively higher inflation record may have amplified monetary forces in the dynamics of the real exchange rates.

Comments

© 2007, the author(s). Published under Creative Commons License. Original published version available at https://doi.org/10.1080/15140326.2007.12040487.

Recommended Citation

Mollick, André Varella. “Random Walks and Half-Lives in Chilean and Mexican Peso Real Exchange Rates: 1980 – 2003.” Journal of Applied Economics 10, no. 1 (May 2007): 185–211. https://doi.org/10.1080/15140326.2007.12040487.

First Page

185

Last Page

211

Publication Title

Journal of Applied Economics

DOI

10.1080/15140326.2007.12040487