Estimation of Structural Models and the Evolution of the Peso-Dollar Exchange Rate after the Subprime Crisis

Abstract

In the present paper we analyze the influence over the nominal exchange rate of the MX-USA interest rate differential, and the financial account of the balance of payments; and to prove whether there was structural change in the third quarter of 2008. In order to do this, we estimate models of nominal exchange rate using monthly data from 1996 to 2015, taking the specifications of the following models: purchasing power parity, monetary, traditional flow and portfolio equilibrium. Our results find some evidence indicating that the interest rates differential and the financial account explain the fluctuations of the exchange rate; and evidence of structural change in the exchange rate evolution starting 2008. As a result it is concluded that, the effect of both national and USA monetary policy, and of the movements of international capitals and exchange rate evolution has suffered structural change as a consequence of the Subprime crisis.