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Milkshake Prices, International Reserves, and the Mexican Peso

Thomas Fullerton () and David Torres
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David Torres: El Paso Water Utilities

International Finance from EconWPA

Abstract: Menu prices from 13 international restaurant franchises that operate in both El Paso, Texas and Ciudad Juarez, Mexico 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 for the exchange rate. In addition to the multi-product price ratio, the empirical analysis also incorporates interst rate parity 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: Purchasing Power Parity; Exchange Rates; border Economies (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2005-08-25
Note: Type of Document - doc; pages: 24
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