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Capital Flows, Exchange Rate Regime, and Macroeconomic Performance in Mexico

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  • Carlos A. Ibarra

Abstract

This paper analyzes the short-term effects of foreign capital flows on aggregate demand in Mexico: their magnitude, transmission channels, and the possible influence of the country's choice of exchange rate regime. The study is motivated by the introduction of a floating system in December 1994, in a context of renewed volatility of international capital flows. During the band period, in the early 1990s, capital flows different from FDI had a strong effect on both consumption and investment demand. The real exchange rate and stock market prices were important transmission channels.

Suggested Citation

  • Carlos A. Ibarra, 2004. "Capital Flows, Exchange Rate Regime, and Macroeconomic Performance in Mexico," WIDER Working Paper Series RP2004-27, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2004-27
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    File URL: https://www.wider.unu.edu/sites/default/files/rp2004-027.pdf
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    References listed on IDEAS

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