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Are all types of capital flows driven by the same factors? Evidence from Mexico

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  • Ibarra-Ramírez Raúl
  • Téllez León Elizabeth

Abstract

In this paper we analyze the impact and persistence of shocks to global (push) and domestic (pull) factors on each component of the financial account for the Mexican Balance of Payments at the highest degree of disaggregation, including investment by foreign residents in Mexican public and private sector securities, as well as investment by domestic residents in foreign securities. To this end, we estimate impulse response functions from vector autoregressive models for the period 1995-2015. We find that an increase in the foreign interest rate leads to lower portfolio investment, particularly in Mexican public sector securities. An increase in global risk generates lower portfolio investment, particularly in private sector securities. Foreign investors respond to a higher extent to foreign interest rate and liquidity shocks compared to domestic investors.

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  • Ibarra-Ramírez Raúl & Téllez León Elizabeth, 2017. "Are all types of capital flows driven by the same factors? Evidence from Mexico," Working Papers 2017-18, Banco de México.
    • Handle: RePEc:bdm:wpaper:2017-18
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    Cited by:

    1. Hernández Vega Marco A., 2021. "The Nonlinear Effect of Uncertainty in Portfolio Flows to Mexico," Working Papers 2021-11, Banco de México.
    2. António Afonso & José Alves & Krzysztof Beck & Karen Jackson, 2022. "Financial, Institutional, and Macroeconomic Determinants of Cross-Country Portfolio Equity Flows," CESifo Working Paper Series 9872, CESifo.
    3. Pawe³ Œliwiñski, 2023. "Endogenous money supply, global liquidity and financial transactions: Panel evidence from OECD countries," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(1), pages 121-152, March.
    4. Christopher Loewald, 2021. "Macro works a decisiontree approach to exchange rate policy," Working Papers 11009, South African Reserve Bank.
    5. Alba Carlos & Cuadra Gabriel & Hernández Juan R. & Ibarra-Ramírez Raúl, 2021. "Capital Flows to Emerging Economies and Global Risk Aversion during the COVID-19 Pandemic," Working Papers 2021-17, Banco de México.
    6. Christopher Loewald, 2021. "Macro works applying integrated policy frameworks to South Africa," Working Papers 11021, South African Reserve Bank.

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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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