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The COVID-19 Economic Crisis in Mexico through the Lens of a Financial Conditions Index

Author

Listed:
  • Carrillo Julio A.
  • García Ana Laura

Abstract

The COVID-19 pandemic not only generated real shocks affecting economic activity severely, but also a broad uncertainty that unleashed an extreme shock to financial markets. In this paper, we focus on the financial dimension of the pandemic from the viewpoint of an emerging market economy. Accordingly, we estimate a financial conditions index for Mexico since 1993 and find that the acute turmoil generated by the pandemic stands among the four largest episodes of financial distress experienced by the country. In addition, we find evidence suggesting that real variables have responded differently to shocks that worsen financial conditions than to shocks that improve them.

Suggested Citation

  • Carrillo Julio A. & García Ana Laura, 2021. "The COVID-19 Economic Crisis in Mexico through the Lens of a Financial Conditions Index," Working Papers 2021-23, Banco de México.
    • Handle: RePEc:bdm:wpaper:2021-23
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    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7B65CEB19A-B4EF-F2E3-73E0-4E23480F8236%7D.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Salgado Alfredo & Trujillo Alejandro, 2023. "Growth at Risk and Uncertainty: Evidence from Mexico," Working Papers 2023-08, Banco de México.
    2. Alba Carlos & Cuadra Gabriel & Ibarra Raúl, 2023. "Effects of the Extraordinary Measures Implemented by Banco de México during the COVID-19 Pandemic on Financial Conditions," Working Papers 2023-03, Banco de México.

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    More about this item

    Keywords

    COVID-19; financial conditions; emerging-market economy; local projections;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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