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Error correction exchange rate modeling: Evidence for Mexico

Author

Listed:
  • Thomas Fullerton
  • Miwa Hattori
  • Cuauhtémoc Calderón
Abstract
A set of error correction models are proposed for the nominal exchange rate between the Mexican peso and the United States dollar. The basic theoretical frameworks utilize balance of payments and monetary constructs. Empirical estimation results are fairly weak for both specifications irrespective of the interest rate variable selected. Although dynamic simulation properties of the equations are acceptable, in no case do they generate levels of accuracy that exceed those associated with a random walk. Copyright Academy of Economics and Finance 2001

Suggested Citation

  • Thomas Fullerton & Miwa Hattori & Cuauhtémoc Calderón, 2001. "Error correction exchange rate modeling: Evidence for Mexico," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 25(3), pages 358-368, September.
    • Handle: RePEc:spr:jecfin:v:25:y:2001:i:3:p:358-368
    DOI: 10.1007/BF02745895
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    References listed on IDEAS

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    Cited by:

    1. Thomas M. Fullerton, Jr. & Juan Carlos Vázquez Morales & Martha Patricia Barraza de Anda, 2011. "Dinamica de corto plazo del empleo en las maquiladoras de Reynosa, Tamaulipas," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 23-40, May.
    2. Kelly Burns & Imad Moosa, 2017. "Demystifying the Meese–Rogoff puzzle: structural breaks or measures of forecasting accuracy?," Applied Economics, Taylor & Francis Journals, vol. 49(48), pages 4897-4910, October.
    3. Salman Ali Shah & Chen He & Mao Yu & Wang Xiaoqin, 2016. "Exchange Rate Channel and Economic Growth: Empirical Investigation in a Developing Country’s Setup," International Journal of World Policy and Development Studies, Academic Research Publishing Group, vol. 2(9), pages 69-74, 09-2016.
    4. Otavio De Medeiros, 2005. "Order Flow and Exchange Rate Dynamics in Brazil," Finance 0503019, University Library of Munich, Germany.
    5. Fullerton, Th. & Lopez, J.J., 2005. "Error Correction Exchange Rate Modeling for Mexico: 1980 – 2001," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(3), pages 17-30.
    6. von Furstenberg, George M., 2006. "Mexico versus Canada: Stability benefits from making common currency with USD?," The North American Journal of Economics and Finance, Elsevier, vol. 17(1), pages 65-78, March.
    7. Moosa, Imad & Burns, Kelly, 2014. "The unbeatable random walk in exchange rate forecasting: Reality or myth?," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 69-81.
    8. Haruna, Issahaku & Abdulai, Hamdeeya & Kriesie, Maryiam & Harvey, Simon K., 2015. "Exchange rate forecasting in the West African Monetary Zone: a comparison of forecast performance of time series models," MPRA Paper 97009, University Library of Munich, Germany, revised 26 Jul 2015.
    9. Thomas M. FULLERTON & Dipanwita BARAI & Adam G. WALKE, 2017. "Nominal Exchange Rate Dynamics for the Taka," Turkish Economic Review, KSP Journals, vol. 4(2), pages 130-148, June.
    10. Imad Moosa & Kelly Burns, 2014. "Error correction modelling and dynamic specifications as a conduit to outperforming the random walk in exchange rate forecasting," Applied Economics, Taylor & Francis Journals, vol. 46(25), pages 3107-3118, September.
    11. Daniel Garces-Diaz, 2004. "How Does the Monetary Model of Exchange Rate Determination Look When It Really Works?," Econometric Society 2004 North American Winter Meetings 60, Econometric Society.

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