Milkshake Prices, International Reserves, and the Mexican Peso

Thomas Fullerton () and David Torres

MPRA Paper from University Library of Munich, Germany

Abstract: Menu prices from 13 international restaurant franchises that operate in both El Paso and Ciudad Juarez are utilized to examine the behavior over time of the peso/dollar exchange rate. Parametric and non-parametric tests indicate that the price ratio alone provides a biased estimator of the exchange rate. In addition to the multi-product price ratio, the empirical analysis also incorporates interst rate prity and balance of payment variables. The combination of unique microeconomic sample data with national macroeconomic variables illustrates one manner in which border economies provide information regarding the interplay of financial markets between Mexico and the United States.

Keywords: Prices; exchange rates; border economics (search for similar items in EconPapers)
JEL-codes: R15 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mon
Date: 2005, Revised 2005

Published in Frontera Norte 33.17(2006): pp. 53-76

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Related works:
Working Paper: Milkshake Prices, International Reserves, and the Mexican Peso (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:434

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