Random walks and half-lives in Chilean and Mexican peso real exchange rates: 1980-2003

Andre Mollick ()

Journal of Applied Economics, 2007, vol. 10, 185-211

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. :

Keywords: ARMA models; half-lives; random walks; real exchange rates; unit roots (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:10:y:2007:n:1:p:185-211

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