Was the Peso Overvalued?

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The article presents the arguments on whether the peso is overvalued or not. The Balassa-Samuelson theorem was used as argument against labeling the peso as overvalued while Krugman convincingly argued otherwise. To give an empirical sense to the debate, an equilibrium exchange rate was calculated with monthly data from 1980-1997 using the Hodrick-Prescott filter as applied by Goldfajn and Valdes.