A Statistical Study of the Value of the Mexican Peso Relative to the Dollar and its Volatility

This paper studies the behavior of the Mexican peso during the floating exchange rate period of 1995-1996. We study the statistical properties of the exchange rate's daily fluctuations, and we compared them with those observed for other currencies. We conclude that except for the periods of extreme volatility experienced in 1995, which were associated with an increase in uncertainty towards the whole macroeconomic strategy, the volatility of the Mexican peso was similar to that experienced by other currencies under a floating exchange rate regime. We also study the effect of domestic and foreign interest rates on the exchange rate and its volatility. Finally, we look at the impact of exchange rate changes and foreign interest rates on domestic interest rates