Commercial Bank and Currency Bureau Exchange Rate Sell-Buy Spreads in a Northern Mexico Metropolitan Economy

Abstract

ABSTRACT Commercial banks and currency kiosk bureaus provide exchange services throughout Ciudad Juarez. This study employs newspaper data to examine how the bank and kiosk sell-buy spreads are affected by border crossings, the bilateral peso per dollar exchange rate, and 90-day Mexico – U.S. treasury yield differentials. Sample data are from January 2009 through June 2016. Parameter estimation is carried out using a GLS ARMAX procedure. Empirical results indicate that bank spreads increase as the peso weakens. Exchange bureau spreads decrease as cross-border traffic flows increase. Currency kiosk spreads tend to widen as 90-day yield gaps become larger.