Central bank research hub - Papers by Juan R. Hernández
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Research hub papers by author Juan R. HernándezenIdentifying Dornbusch's Exchange Rate Overshooting with Structural VECs: Evidence from Mexico
http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{78241C61-917C-FC3E-E5EC-B783B0AB3E2B}.pdf
Bank of Mexico Working Papers by Carlos Capistrán; Daniel Chiquiar; Juan R. HernándezIdentifying Dornbusch's Exchange Rate Overshooting with Structural VECs: Evidence from Mexico2017-06-22T06:23:00ZIn this paper we use data from Mexico to identify Dornbusch's (1976) exchange rate overshooting hypothesis. We specify and estimate a structural cointegrated VAR that considers explicitly the presence of a set of long-run theoretical relations on macroeconomic variables (a purchasing power parity, an uncovered interest parity, a money demand, and a relation between domestic and U.S. output levels). We then impose a recursiveness assumption to identify the response of domestic variables to a monetary policy shock. The long-run restrictions embedded in the model are themselves identified, estimated, and tested using an ARDL methodology that is robust to the degree of persistence of the time series and, in particular, to whether they are trend- or first-difference stationary. With this approach, we are able to find that the response of the exchange rate to monetary policy shocks is consistent with Dornbusch's model.Identifying Dornbusch's Exchange Rate Overshooting with Structural VECs: Evidence from MexicoFull texthttp://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{78241C61-917C-FC3E-E5EC-B783B0AB3E2B}.pdfJuan R. HernándezDaniel ChiquiarCarlos CapistránCarlos Capistrán; Daniel Chiquiar; Juan R. Hernández2017-06Bank of Mexico Working PapersC32C51E10E17Unit Root Testing in ARMA Models: A Likelihood Ratio Approach
http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{76C16AFE-A7CC-5B69-4E8F-3B0662A2A959}.PDF
Bank of Mexico Working Papers by Juan R. HernándezUnit Root Testing in ARMA Models: A Likelihood Ratio Approach2016-04-27T06:23:00ZIn this paper I propose a Likelihood Ratio test for a unit root (LR) with a local-to-unity Autoregressive parameter embedded in ARMA(1,1) models. By dealing explicitly with dependence in a time series through the Moving Average, as opposed to the long Autorregresive lag approximation, the test shows gains in power and has good small-sample properties. The asymptotic distribution of the test is shown to be independent of the short-run parameters. The Monte Carlo experiments show that the LR test has higher power than the Augmented Dickey Fuller test for several sample sizes and true values of the Moving Average parameter. The exception is the case when this parameter is very close to -1 with a considerably small sample size.Unit Root Testing in ARMA Models: A Likelihood Ratio ApproachFull texthttp://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{76C16AFE-A7CC-5B69-4E8F-3B0662A2A959}.PDFJuan R. HernándezJuan R. Hernández2016-04Bank of Mexico Working PapersC22Peso-Dollar Forward Market Analysis: Explaining Arbitrage Opportunities during the Financial Crisis
http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{EA2BC03E-F8C3-23C6-3A2E-7B5E9C9EB09E}.pdf
Bank of Mexico Working Papers by Juan R. Hern andezPeso-Dollar Forward Market Analysis: Explaining Arbitrage Opportunities during the Financial Crisis2014-05-31T06:19:59ZUsing a vector error correction model I test whether shocks in the funding liquidity conditions in the U.S. and Europe separately explain deviations from the covered interest parity (CIP) between the U.S. Dollar and the Mexican Peso. I find that: (1) Apparent deviations from the CIP seem to be persistent, unless a closer measure to the true costs of funding for the agents is considered. (2) A stable long-run equilibrium relation emerges when I include the effects of funding liquidity shocks stemming from the U.S. and Europe. (3) The exchange rate forward premium adjusts towards a long-run equilibrium relation given by the CIP. (4) Surprisingly, the yield on 1-month Mexican CETEs has its own stochastic trend despite the strong relation between the U.S. and Mexico's economies. (5) Analysis confirms that both future and spot exchange rates are affected by shocks stemming from the U.S. Treasury Bills, the funding liquidity in the U.S. and Europe, and the Mexican CETEs.Peso-Dollar Forward Market Analysis: Explaining Arbitrage Opportunities during the Financial CrisisFull texthttp://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{EA2BC03E-F8C3-23C6-3A2E-7B5E9C9EB09E}.pdfJuan R. HernándezJuan R. Hern andez2014-05Bank of Mexico Working PapersC58F31G12G13G14