Measuring the real exchange rate: a comparison of official measures in Mexico
Abstract
This paper compares different measures of the real exchange rate (RER) for Mexico. The first part of the paper presents an overview of five different measures of RER, emphasizing the theoretical advantages and disadvantages of each. The second part presents an econometric comparison of the alternatives analyzed in order to have empirical support that can tell us which of these indices may be preferred on the other. The analysis is made under the criterion that a good measure of RER should be sensitive to changes in export supply, import demand and capital flows.
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