The real exchange rate process and its real effects: The cases of Mexico and the USA

Exchange rate management is a salient macroeconomic issue, especially in developing countries. In this paper, we study political economy factors that may affect the real exchange rate (RER) process and the real economic effects of the RER. We review recent literature on the effects of elections on the exchange rate, and adapt Ball’s (1992) model to show that uncertainty about the future course of policy may make more appreciated RER’s less predictable. We also review the literature on the real effect of RER appreciations and of RER uncertainty. We then construct a simultaneous GARCH-M model of the joint determination of the RER and output capable of testing our hypotheses simultaneously in a single model. We estimate the model using data first from Mexico, a developing country, and the US. In Mexico we find that elections significantly affect the evolution of the RER, that more appreciated RERs are less predictable, that RER depreciations lower output growth and that RER uncertainty lowers output growth, even when controlling for its wellstudied effect on trade. By contrast, none of these effects are found in the US data.real exchange rate volatility, economic growth, electoral cycle

Crecimiento y liberalización económica: Un análisis de series de tiempo para México

This paper presents a methodology to measure the effects of economic liberalization and deregulation on the Mexican economic growth in the long-run. The methodology can determine whether there has been a permanent change in the rate of growth. The results show that the increase in the Mexican case has been transitory and that there has been a change in the level of growth rather than in the rate. This suggests that technology and labor productivity have not changed substantialy, and hence that the growth is explained by the use of idle capacity. However, since it takes time for technological changes to appear, these results have to be taken as preliminary.

En la búsqueda de la inserción de México en la discusión de problemas económicos universales: Los economistas mexicanos (nacidos entre 1950 y 1970)

Este escrito describe el largo proceso de insertar a México en la discusión de problemas económicos en los foros globales. Revisa los obstáculos que se han tenido que superar. Asimismo, de manera implícita concluye que el camino que la generación de economistas nacidos entre 1950 y 1970 ha sido tortuoso y que de ninguna forma se puede considerar como concluido. Con base en esto resalta los actores mexicanos que lo iniciaron, y que ha dedicado su vida a la academia

Fiscal Decentralization in Mexico: The Bailout Problem

The purpose of this paper is to identify and analyze the determinants and consequences of bailing out states, in particular, those observed in Mexico. This work suggests that the explicit generalized bailout carried out by the federal government in Mexico in 1995 created a moral hazard problem. Another result of the analysis is that the existing institutional-legal framework is not adequate, since it provides incentives for states to borrow and for banks to lend without evaluating the risk of the project. Likewise, the importance of the state is a major determinant in providing bailout transfers. Also, the more fiscal need a state government has when the state government is incapable of adjusting its expenditure, the more likely the state to get an extraordinary transfer during the period of study. On the other hand, political variables are not an important determinant of a bailout, except, perhaps, when there are state elections. It is also shown that excessive indebtedness of local states may have equity implications as well: bailouts tend to be highly regressive, as the poorer—and less indebted—states receive much less in extraordinary resources.

Comportamiento del tipo de cambio real y desempeño económico en México

An ARCH (Autoregressive Conditional Heteroscedasticity) model is used to obtain the variances over time for the real exchange rata (RER) (peso/dollar) in Mexico. Then a model is constructed to establish the relationship between the RER variability and exports and Mexican GDP, respectively. A negative relationship is found which suggests that not only the level but the stability of the RER is important in explaining economic performance in an open economy. Furthermore, an alternative measure of RER misalignment is developed which, in turn, is shown to be negatively related with economic performance in Mexico. These results suggest that more stable exchange rate regimes should be adopted to create an environment suitable for economic growth.

La estructura de la deuda pública en México: Lecciones y perspectivas

Este artículo examina algunas de las hipótesis sobre las estrategias de deuda que a prioriparece haber seguido el gobierno mexicano, partiendo de un examen de la evolución ycomposición de la misma. Un aspecto interesante de este examen es que el nivel de la deudatotal con respecto al PIB en México era relativamente bajo (27 por ciento), sobre todocomparado con algunos países de la Unión Europea como Italia y Bélgica. Esto sugiere que lacomposición de la deuda y su perfil de vencimientos se convierten en un aspecto importante, particularmente en México. De este examen uno de los acertijos que saltan a la escena es si laexcesiva indización de la deuda interna al dólar durante 1994 fue una medida adecuada.

Regímenes cambiantes, estructura de deuda y fragilidad bancaria en México

This paper uses the switching probability regimes methodology to estimate the determinants of financial crisis, measured in changes in the stochastic regimes of interest and exchange rates. We use Mexico to perform the exercise. Results suggest that public debt structure is important in explaining the so-called tequila crisis. This result contrasts with the determinants identified by the existent literature. In addition, financial fragility measured as the ratio of M2 to reserves, was also important in explaining the regimes under study.

Internalizando externalidades: El impuesto a la gasolina en Guatemala

(Internalizing externalities: Gasoline tax in Guatemala)The objective of this article is to estimate the optimal level of the tax on gasoline to internalize the costs caused by the use of cars in a developing country such as Guatemala. The estimation is done using the methodology by Parry and Small (2005). The results suggest an optimal tax level of USD27.5 cents per liter. Forty percent of the tax is explained by the externalities associated to traffic congestion. The estimated level of USD27.5 cents per liter is above the tax currently imposed for the two types of gasoline sold in Guatemala, thus their adjustment is recommended. There is a degree of uncertainty regarding the proper value of some of the parameters of the model; however, the sensitivity analysis reports that the results are robust. The study stands out among others because it offers a detailed procedure for the estimation of this tax, using information from a developing country. Finally, the need to implement public policies to decrease the adverse effects of the tax, especially among middle and lower decile households.El objetivo de este artículo consiste en estimar el nivel óptimo de impuesto a la gasolina para internalizar los costos provocados por el uso del automóvil en un país en desarrollo como Guatemala. La estimación se lleva a cabo usando la metodología de Parry y Small (2005). Los resultados sugieren un nivel de impuesto óptimo de 27.5 cts. de dólar/litro. Destaca que el 40% del impuesto está explicado por las externalidades asociadas a la congestión vehicular. El nivel estimado de 27.5 cts. de dólar/litro se encuentra por encima del impuesto en vigor para los dos tipos de gasolina a la venta en Guatemala, por lo cual se recomienda su ajuste. Existe cierta incertidumbre respecto al valor apropiado de algunos parámetros del modelo; sin embargo, el análisis de sensibilidad reporta que los resultados son robustos. El estudio destaca por ofrecer un procedimiento detallado para la estimación de este impuesto utilizando información de un país en desarrollo. Finalmente, se discute la necesidad de implementar políticas públicas para aminorar los efectos adversos del impuesto, especialmente entre los hogares de deciles medios y bajos

"Eficiencia en el Mercado Accionario: Nueva Evidencia para el Caso Mexicano "

This article uses bootstrap techniques to determine whether the exchange market in Mexico, during the period 1997-2011, is efficient or not. To the best of our knowledge, although this methodology is not new, it has not yet been applied to the case of Mexico. Based on the daily changes of observed exchange rates random sequences of prices are generated to obtain the empirical distribution of returns under two well known trading rules: filter and moving average. Further, we determine if, for each trading rule, the returns obtained with the series of prices actually observed belong to the corresponding empirical distribution, in which case the foreign exchange market will be consistent with the efficiency hypothesis. Our results suggest that there is no evidence to reject the efficiency hypothesis in the foreign exchange Mexican market for the period considered in this study.En este artículo se utiliza el método de bootstrap para evaluar la eficiencia del mercado cambiario en México durante el periodo 1997-2011. Si bien esta metodología no es nueva, hasta donde se conoce no ha sido todavía aplicada al caso mexicano. Esencialmente, a partir de los cambios diarios observados de precios se generan series aleatorias de precios a fin de obtener la distribución empírica de los beneficios obtenidos bajo dos conocidas reglas técnicas de operación bursátil: las reglas de filtro y media móvil. Posteriormente se determina si, para cada regla técnica, los beneficios obtenidos con las series realmente observadas pertenecen, con un nivel de confianza dado, a la distribución empírica, en cuyo caso el comportamiento observado del mercado sería consistente con la hipótesis de eficiencia. Los resultados obtenidos con esta metodología sugieren que no hay evidencia que permita rechazar la hipótesis de eficiencia del mercado cambiario mexicano durante este periodo.