Mexico's 1994 Exchange Rate Crisis Interpreted in Light of the Non-Traded Model / Andrew M. Warner.

Format:

Book

Author/Creator:

Warner, Andrew M.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6165.

NBER working paper series no. w6165

Language:

English

Subjects (All):

Foreign exchange rates--Econometric models.

Foreign exchange rates.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Cambridge, Mass. : National Bureau of Economic Research, 1997.

Summary:

This paper attempts to make the case that a 2-sector model using the familiar traded non-traded distinction offers a reasonably successful empirical account of why Mexico needed to devalue its exchange rate in 1994. This model provides a way to define and measure disequilibrium in the exchange rate, and thus may be useful in assessing the likelihood of an exchange rate crisis in other developing countries. The results suggest that Mexico's exchange rate was about 25 percent overvalued on the eve of its 1994 crisis, but was much closer to equilibrium by the end of 1996. The approach in this paper is compared with other ways of assessing disequilibrium in the exchange rate, based on purchasing power parity or monetary models of the exchange rate.

Notes:

Print version record

September 1997.

Includes bibliographical references.