Abstract

FULLERTON JR., Thomas M.  and  CORONADO, Roberto. Border Region Evidence Regarding Mexican Peso Currency Valuation. Inv. Econ [online]. 2001, vol.61, n.237, pp.13-24. ISSN 0185-1667.

Of prime interest to border economies is exchange rate performance and currency valuation. Commonly used tools for this task include purchasing power parity nominal benchmarks and inflation adjusted trade-weighted indices. The latter have the advantage of relying upon commonly available international macroeconomic data, but overlook other information that may offer additional insight to issues surrounding exchange rate policy debates. Other efforts have utilized small samples of international product price comparisons to shed light on currency valuation questions. This paper develops one such tool by repeated sampling of prices charged for identical menu items sold at restaurant franchises in El Paso, Texas and Ciudad Juárez, Chihuahua. A battery of statistical tests indicate that the currency value of the peso frequentently differed from the exchange rate implied by the border region restaurant price ratios in 1997, 1998, and 1999.

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