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

Author

Listed:
  • Raul Ibarra

    (Banco de México, Dirección General de Investigación Económica)

  • Isela-Elizabeth Tellez-Leon

    (International Institute for Applied Systems Analysis
    International Institute for Applied Systems Analysis)

Abstract

In this paper, we analyse 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. 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.

Suggested Citation

  • Raul Ibarra & Isela-Elizabeth Tellez-Leon, 2020. "Are all types of capital flows driven by the same factors? Evidence from Mexico," Empirical Economics, Springer, vol. 59(1), pages 461-502, July.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:1:d:10.1007_s00181-019-01624-5
    DOI: 10.1007/s00181-019-01624-5
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    Cited by:

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    2. António Afonso & José Alves & Krzysztof Beck & Karen Jackson, 2022. "Financial, Institutional and Macroeconomic Determinants of Cross-Country Portfolio Equity Flows," Working Papers REM 2022/0235, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    3. Carlos Alba & Gabriel Cuadra & Juan R. Hernandez & Raul Ibarra, 2024. "Capital flows to emerging economies and global risk aversion during the COVID‐19 pandemic," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2804-2836, July.
    4. Hernández, Juan R. & Ventosa-Santaulària, Daniel & Valencia, J. Eduardo, 2024. "Global supply chain inflationary pressures and monetary policy in Mexico," Emerging Markets Review, Elsevier, vol. 58(C).
    5. Christopher Loewald, 2021. "Macro works applying integrated policy frameworks to South Africa," Working Papers 11021, South African Reserve Bank.
    6. 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.
    7. Christopher Loewald, 2021. "Macro works a decisiontree approach to exchange rate policy," Working Papers 11009, South African Reserve Bank.

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    More about this item

    Keywords

    Capital flows; Push factors; Pull factors; Vector autoregression;
    All these keywords.

    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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