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Working Paper
Convertibility risk, default risk, and the Mexdollar anomaly
Rogers (l992a,b) I put forth the convertibility risk hypothesis in order to explain the anomalous n~gative relationship between the expected rate of Mexican peso depreciation and the ratio of Mexdollars to peso denominated demand deposits. Recently, Gruben and Welch (1994) examine the effect of deteriorating bank loan quality on the variables I consider. Using a cointegration framework, the authors find (i) a negative relationship between non-performing loans and the dollarization ratio and (ii) the conventional positive relationship between expected peso depreciation and dollarization. The ...
Working Paper
The mirage of fixed exchange rates
This paper discusses the profound difficulties of maintaining fixed exchange rates in a world of expanding global capital markets. Contrary to popular wisdom, industrialized-country monetary authorities easily have the resources to defend exchange parities against virtually any private speculative attack. But if their commitment to use those resources lacks credibility with markets, the costs to the broader economy of defending an exchange-rate peg can be very high. The dynamic interplay between credibility and commitment is illustrated by the 1992 Swedish and British crises.
Conference Paper
Real exchange rates and investment booms in Mexico
Journal Article
The giant sucking sound: did NAFTA devour the Mexican peso?
Five years of economic reforms had made Mexico a model for other developing nations by the end of 1993, when Mexico was preparing to enter into the North American Free Trade Agreement (NAFTA) with Canada and the United States. But less than a year later, in December 1994, Mexico experienced a severe financial crisis, forcing it to borrow from the IMF and the United States. Some commentators blamed the enactment of NAFTA for the devaluation of the peso and the ensuing economic turmoil in Mexico, with some calling for renegotiation or even repeal of the agreement. Author Christopher J. Neely ...
Journal Article
The banking sector rescue in Mexico
In Mexico the December 1994 peso devaluation provoked a profound economic downturn in that country and revealed a fragile banking sector. Fearful that the financial system would collapse under a rising level of past due loans, the Mexican government mounted a rescue of the banking sector by intervening in the daily operations of some problem banks while establishing a series of capitalization and restructuring programs available to all banks. ; This article examines Mexico's bank rescue efforts (1995-98) with a particular focus on the role of the deposit insurance fund, the Bank Fund for the ...
Journal Article
How much will the global financial storm hurt Mexico?
The credibility earned by prudent policymaking over the past decade should help Mexico weather the current financial storm without devastating effects on real economic activity.
Journal Article
Regional effects of the peso devaluation
Journal Article
New boom on the border
Journal Article
Mexico and the peso