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dc.titleWhy Does the Peso-Dollar Exchange Rate Show a Depreciation Trend?: The Role of Productivity Differentials
dc.contributor.authorLópez, Arnoldo
dc.contributor.authorVentosa-Santaulària, Daniel
dc.contributor.orgunitCountry Department Central America, Haiti, Mexico, Panama and the Dominican Republic
dc.coverageMexico
dc.date.available2018-10-22T00:00:00
dc.date.issue2018-10-16T00:00:00
dc.description.abstractOver the last three decades, Mexico’s macroeconomic policy has been driven by a sound orthodox strategy: an open economy via many trade agreements signed since the mid-1980s, a nominal exchange rate under a flexible regime since 1994, central bank autonomy, and responsible fiscal policy, among other benchmarks. Nevertheless, the exchange rate has continued on a path of depreciation against the US dollar. In this paper, we show that although an equilibrium relationship exists between the exchange rate and prices in Mexico and the US (its main commercial partner), there are other forces affecting the former. The main factor in this relentless long-term depreciation is the loss of productivity in Mexico relative to the US. In addition, we show that the extraordinary liquidity supplied by the US during the 2008 crisis caused the Mexican peso to appreciate against the dollar.
dc.format.extent33
dc.identifier.doihttp://dx.doi.org/10.18235/0001370
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Why-Does-the-Peso-Dollar-Exchange-Rate-Show-a-Depreciation-Trend-The-Role-of-Productivity-Differentials.pdf
dc.language.isoen
dc.mediumAdobe PDF
dc.publisherInter-American Development Bank
dc.subjectMonetary Policy
dc.subjectForeign Exchange
dc.subjectExchange Rate
dc.subject.jelcodeC22 - Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes
dc.subject.jelcodeE24 - Employment • Unemployment • Wages • Intergenerational Income Distribution • Aggregate Human Capital • Aggregate Labor Productivity
dc.subject.jelcodeO11 - Macroeconomic Analyses of Economic Development
dc.subject.jelcodeO19 - International Linkages to Development • Role of International Organizations
dc.subject.jelcodeO47 - Empirical Studies of Economic Growth • Aggregate Productivity • Cross-Country Output Convergence
dc.subject.keywordsProductivity;Nominal Exchange Rate;Federal Reserve Assets;Prices
dc.typeWorking Papers
idb.identifier.pubnumberWorking Papers
idb.operationME-P1167
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