Bilateral exchange rate's nominal and real variations between Mexico and United States

Abstract

THIS PAPER ANALYSES NOMINAL AND REAL EXCHANGE VARIATIONS ORIGIN BETWEEN MEXICO AND UNITED STATES. IT SHOWS HOW REAL AND NOMINAL SHOCKS HAVE INFLUENCE OVER EXCHANGE RATE. INSIDE THIS SHOCKS, THE RESULTS SUGGEST THAT CAPITAL FLOWS, INCLUDING FOREIGN DIRECT INVESTMENT, ARE THE MOST RELEVANT. FINALLY, THIS PAPER STATE THAT SHORT TERM INTEREST RATE DIFFERENTIALS BETWEEN MEXICO AND UNITED STATES DOESN´T HAVE INFLUENCE OVER EXCHANGE RATE VARIATIONS.