Effect of the Covid-19 pandemic on the exchange rate under the microstructure approach
DOI:
https://doi.org/10.24275/uam/azc/dcsh/ae/2024v39n100/OlveraKeywords:
Exchange rate, Future market, Microstructure approach, Structural changeAbstract
This research aims to determine the effect of the global Covid-19 pandemic on the exchange rate, where the microstructure approach will be used, which uses long and short positions in the futures market. Weekly data will be available during the period 2010-2023. A negative relationship has been found between the exchange rate and the net positions, as well as a positive relationship between the exchange rate and the interest rate differential between Mexico and the United States, as indicates the existing literature. The main finding has been the presence of structural change in the relationship due to the Covid-19 pandemic. Therefore, it is concluded that the microstructure approach is an adequate model to explain exchange rate fluctuations in the short-term, where the relationship has suffered a structural change due to the pandemic.
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Copyright (c) 2024 Tania Alejandra Olvera, José Carlos Espinoza Briones, Klender Aimer Cortez Alejandro
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