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

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.

KEYWORDS:

• Currency markets
• border economics
• sell-buy spreads

Acknowledgments

Financial support for this research was provided by El Paso Water, National Science Foundation Grant DRL-1740695, Texas Department of Transportation ICC 24-0XXIA001, TFCU, and the UTEP Center for the Study of Western Hemispheric Trade. Helpful comments and suggestions were provided by Steven Fullerton and two anonymous referees.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data employed for this study are archived at the University of Texas at El Paso Library and can be downloaded for free via https://scholarworks.utep.edu/ef_data/2/

Additional information

Funding

This work was supported by the NSF [DRL-1740695]; Texas Department of Transportation [ICC 24-0XXIA001]; TFCU; El Paso Water; University of Texas at El Paso Center for the Study of Western Hemispheric Trade.