The mexican imports and the exchange rate: The role of the expectations, 1985-2000

Abstract

THIS PAPER ANALYZES THE RELATIONSHIP AMONG THE EXPECTED EXCHANGE RATE AND PRICES OF THE MEXICAN IMPORTS (WHIT RESPECT TO DOMESTIC GOODS) UNDER AN APPROACH OF INTERTEMPORARY SUBSTITUTION. WE THINK THAT AN EXPECTED DEVALUATION OF THE MEXICAN PESO IS RELATED WITH THE CONTEMPORARY INCREASE IN THE RELATIVE PRICE OF IMPORTED GOODS FOR MONTHLY DATA IN MEXICO FROM 1985 TO 2000. DEVALUATION EXPECTATIONS OF THE PESO AT A GIVEN MONTH CONCERN POSITIVELY AND SIMULTANEOSLY TO THE RELATIVE PRICE OF IMPORTS. TO GET THIS RESULT GIVEN AN EXPECTED DEVALUATION, IT IS NECESSARY THAT: I) THE FOREIGN FIRMS DO NOT TAKE IN ADVANCE THEIR SALES AS IT WOULD BE EXPECTED; II) FIRMS AND AGENTS IN MEXICO DO NOT DELAY THEIR SALES AS IT WOULD EXPECTED; OR III) A COMBINATION OF BOTH PREVIOUS HYPOTHESES.