TESTS OF PURCHASING POWER PARITY WITH STRUCTURAL BREAK IN THE MEXICAN ECONOMY

Abstract

Mexican studies of Purchasing Power Parity hypothesis (PPP) have reported mixed results, and most of them do not account for structural breaks. The following study presents further findings of the relation of PPP for the Mexican's economy using twelve different definitions of exchange rate, different base year and trade-weights with structural change. Depending on the definitions of the concept of real exchange rate, some results are supportive that purchasing power parity holds as a long-run concept for the Mexican peso, while others are not.