Arbeitspapier

Uncertainty and exchange rate volatility: The case of Mexico

This paper investigates the effect of uncertainty on the volatility of the Mexican peso U.S. dollar exchange rate for the period 1999 - 2018. The empirical analysis consists on estimating a model by OLS and System GMM that includes measures of economic, political, and financial uncertainty, both domestic and international, as explicative variables. The main results show that greater uncertainty leads to higher exchange rate volatility; measures of international uncertainty are found to dominate domestic uncertainty measures, although the domestic uncertainty has also an important effect on the exchange rate volatility; and there is evidence of an amplifying effect of domestic economic uncertainty on exchange rate volatility, especially during periods of recession. These results are shown to be robust to different exchange rate volatility measures, different specifications, and different economic policy uncertainty indices.

Language
Englisch

Bibliographic citation
Series: Working Papers ; No. 2019-12

Classification
Wirtschaft
Foreign Exchange
Information, Knowledge, and Uncertainty: General
Expectations; Speculations
Subject
Exchange Rate Volatility
Uncertainty
Expectations
Hyperinflation
Nachkriegszeit
Weltkrieg
Reparationen
Deutschland (bis 1945)
Österreich-Ungarn
Österreich
Polen

Event
Geistige Schöpfung
(who)
López Noria, Gabriela
Bush, Georgia
Event
Veröffentlichung
(who)
Banco de México
(where)
Ciudad de México
(when)
2019

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • López Noria, Gabriela
  • Bush, Georgia
  • Banco de México

Time of origin

  • 2019

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