Milkshake Prices, International Reserves, and the Mexican Peso

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Published: May 23, 2017
DOI: https://doi.org/10.17428/rfn.v17i33.1055

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Thomas M. Fullerton, Jr.
University of Texas
David Torres
University of Texas

Abstract

Menu prices from 13 international restaurant franchises that operate in both El Paso and Ciudad Juárez are utilized to examine the behavior over time of the peso/dollar exchange rate. Parametric and nonparametric tests indicate that the price ratio alone provides a biased estimator for the exchange rate. In addition to the multiproduct price ratio, the empirical analysis also incorporates interest rate parity and balance of payments 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.RESUMENA partir de los precios del menú de restaurantes de 13 franquicias internacionales que operan en El Paso y Ciudad Juárez se examina el comportamiento del tipo de cambio del peso. Pruebas paramétricas y no paramétricas indican que la relación de precios representa una medida sesgada para el tipo de cambio en términos estrictamente aritméticos. Además de la relación de precios de productos múltiples, el análisis empírico también incorpora tasas de interés de los dos países y una variable que refleja cambios en la balanza de pagos en México. La combinación de datos microeconómicos con datos macroeconómicos ilustra una de las maneras en que las economías fronterizas aportan información acerca de los nexos financieros entre México y Estados Unidos.

Article Details

How to Cite
Fullerton, Jr., T. M., & Torres, D. (2017). Milkshake Prices, International Reserves, and the Mexican Peso. Frontera Norte, 17(33), 53–76. https://doi.org/10.17428/rfn.v17i33.1055
Issue
Vol. 17 No. 33 (2005): enero-junio, 2005
Section
Papers

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