StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Exchange Rate Risk in Mexico - Research Paper Example

Cite this document
Summary
The OECD (organization for economic cooperation and development) countries have been experiencing a very hard time especially when it comes to the exchange rates. The current account deficit has also been another factor that has affected the OECD countries, Mexico is one of the countries that is heading towards a free market economy and when a country moves towards free market economy it mainly depends on free trade to boost its economic growth…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER96.1% of users find it useful
Exchange Rate Risk in Mexico
Read Text Preview

Extract of sample "Exchange Rate Risk in Mexico"

s 5 August 2009 Exchange Rate Risk in Mexico The OECD (organization for economic cooperation and development) countries have been experiencing a very hard time especially when it comes to the exchange rates. The current account deficit has also been another factor that has affected the OECD countries, Mexico is one of the countries that is heading towards a free market economy and when a country moves towards free market economy it mainly depends on free trade to boost its economic growth. This paper will throw light upon exchange rate risk in Mexico and it will also focus on important factors like the current exchange rate system followed in Mexico.

Bretton Woods agreement collapsed in the early 1970s and this caused the exchange rate movements to be inconsistent. "This apparent conflict between theory and empirical evidence poses a problem in determining the optimal role of exchange rates in the formation of appropriate economic policies. The proposition that flexible exchange rates lead to balance of payment equilibrium position primarily rests on the purchasing power parity theory." (Effects of Exchange Rate) Mexico is one of the most important members when it comes to trading with the US and it is also one of the fastest developing economy.

The Gross Domestic Product of the Mexican Economy was $574.5 billion in the year 2001 and the net value of the exports was approximately $178 billion. Mexico is one of the most important trading partners of the US and hence it is very important economically to the US. There has been many instances of Mexican-American dialogues recently and majority of these dialogues have been regarding strengthening the economic relationship between the two countries. "Mexico's main exports are manufactured goods.

These tend to be normal goods. An increase in demand will result in an increase in their consumption. Similar arguments are also applicable for the relation between Mexican Import and Mexican real GDP. This relation is measured by a3 The sign is positive and it is statistically significant." (Effects of Exchange Rate) Mexico is trying very hard to woo manufacturers to establish companies in Mexico, these manufacturers will be assured a tariff-free role in Mexico, and Mexico is doing the same in order to export the products to the US.

The exchange rate uncertainty will not heavily affect the volume of foreign trade; the exchange rate in Mexico will indirectly affect the interest rate in the country. Mexico has to exploit its exports with the US in order to maximize the gains out of export. More than 70% of what Mexico exports directly go to the US and this can further be increased in order to maximize the returns. It is fair to say that the exchange rate is not a big risk in any way, the Mexican economy looks to be quite strong and it is strong and prospering because of the trade relationship it shares with the US.

Works CitedEffects of Exchange Rates (2003). B Net http://findarticles.com/p/articles/mi_qa3674/is_200310/ai_n9302100/ (Accessed on 5 August 2009)Effects of Exchange Rates (2003). B Net http://findarticles.com/p/articles/mi_qa3674/is_200310/ai_n9302100/pg_5/tag=content;col1(Accessed on 5 August 2009)

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Exchange Rate Risk in Mexico Research Paper Example | Topics and Well Written Essays - 500 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1505613-exchange-rate-risk-in-mexico
(Exchange Rate Risk in Mexico Research Paper Example | Topics and Well Written Essays - 500 Words)
https://studentshare.org/miscellaneous/1505613-exchange-rate-risk-in-mexico.
“Exchange Rate Risk in Mexico Research Paper Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1505613-exchange-rate-risk-in-mexico.
  • Cited: 0 times

CHECK THESE SAMPLES OF Exchange Rate Risk in Mexico

US embassy safety after the 1998 US embassy bombings in Tanzania and Kenya

Approved in November 1993 and brought into effect on 1 January 1994 NAFTA or the North American Free Trade Agreement a trilateral agreement holds Canada, mexico and the United States as its members.... NAFTA basically draws rules and guidelines between mexico, Canada and the United States for the elimination of trade barriers regarding goods and originating from within North America.... Founded on the basis of concerns from the environmentalists that companies would either relocate to mexico or that the United States would lower its standards if all three countries...
14 Pages (3500 words) Essay

International expansion-business

The format that this paper will utilize is to first highlight what the risks of currency fluctuations would have… on an American enterprise entering Mexico, followed by a brief history of the history of the Mexican peso then an analysis will be conducted as to the prospects of this currency in the near to late future. There are two types of currency risk associated with investing in mexico International Expansion-Business The purpose of this paper is to prepare an analysis as to the short term and long term prospects of the currency ofMexico (The Peso) relative to the American dollar....
3 Pages (750 words) Essay

Determinants of an Exchange Rate

In the paper “Determinants of an exchange rate” the author analyzes the exchange rate regime being adopted by the particular country.... hellip; According to the author, there is no general theory of exchange rate determination.... According to Levich (2001) there is no general theory of exchange rate determination.... The aim of this paper is to evaluate the main determinants of exchange rate behaviour in the short-run and long-run and explain why exchange rates tend to be volatile and notoriously hard to predict....
9 Pages (2250 words) Essay

The Health of the People in Mexico

Furthermore, the literacy rate in mexico is at an increased level, when compared to the previous years.... mexico has been under Spanish rule for close to three centuries, Then, when mexico eventually got independence, Mexican rulers initiated many constructive measures, including in the health care sector.... The population of mexico has exceeded more than 100 million, and in that direction the country is currently undergoing demographic changes due to a steady decline in its mortality rate, which in turn is leading to increased life expectancy among its people....
17 Pages (4250 words) Essay

The Conditions of Mexican Immigrants

In order to go deeper into the report, it is necessary to know the history of the borderlands of mexico (GOP Legislators Visiting mexico Concerned About Border Security 2001).... The Mestizos started their journey towards the south-west of the United States for a better living, which is now known as mexico (U.... The people, who were staying near the 'borderline' between the USA and mexico, now had to take an important decision of their life (Hernández 2006)....
8 Pages (2000 words) Coursework

Assignment 5 Practice Problems

At the time the exchange rate is $1.... One year later the exchange rate is the same, but the Italian government has expropriated your firms assets paying only €80,000 in compensation.... political riskIt does not matter the exchange rate, what counts is the fact that the government has taken over a private own business.... Suppose mexico is a major export market for your U.... Under insurance risk covers, expropriation of assets is classified… Factors that do affect business besides market based effects include government decisions or changes....
1 Pages (250 words) Assignment

Exchange risk

For instance, low exchange rate support activities like tourism and exports in the economy (Howell & PRS Group, 2011).... The foreign exchange rate leads to an economic growth: it is true that the higher the price of the net exports, the higher the nation Gross domestic product.... The author of the paper "Exchange risk" examines possible foreign exchange risks that multinational companies face and the economic implications of such hazards.... hellip; Foreign exchange risk is the risk that investments or rather an assets, goods and services dominated in foreign currency will lose the value as a result of unfavorable movements in the exchange rates between the foreign currency and domestic currency affecting the product or service in question....
13 Pages (3250 words) Research Paper

Energy Needs in Mexico

The "Energy Needs in mexico" paper explores and examines the energy needs in mexico, and finds out the role of different stakeholders and government in ensuring the satisfaction of these needs.... Research questions are what are the various sources of energy available in mexico.... in mexico, the government Mexico struggles to meet the energy needs of the country by using a combination of different forms of energy.... Notably, coal and fossil fuels are the dominant sources of energy in mexico....
16 Pages (4000 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us