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Capital Flows and Private Investment in Mexico

Author

Listed:
  • Carlos A. Ibarra

    () (Professor, Departamento de Economía, Universidad de las Américas Puebla. Mexico.)

Abstract

Based on the so-called bounds testing approach, the paper studies the long-run effect of capital flows and the real exchange rate on Mexico’s private investment from 1988 through 2008, presenting two main results. First, while capital inflows can potentially increase investment, in practice they may lower it, because, as capital flows in, the peso appreciates. Second, although both FDI and portfolio inflows can increase investment, the effect from FDI is significantly smaller —in contrast to a frequent finding in the literature for other countries. Both results help to explain the low “transfer” of capital flows to investment in Mexico, and more generally the low levels of investment observed in the country.

Suggested Citation

  • Carlos A. Ibarra, 2013. "Capital Flows and Private Investment in Mexico," Economía Mexicana NUEVA ÉPOCA, , vol. 0(3, Cierre), pages 65-99.
  • Handle: RePEc:emc:ecomex:v:22:y:2013:i:3:p:65-99
    as

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    File URL: http://www.economiamexicana.cide.edu/num_anteriores/Cierre-1/02_EM_Carlos_A_Ibarra_(65-99).pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Capital flows; FDI; portfolio investments; investment determinants; real exchange rate; bounds testing approach; Mexico.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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