The nonlinear effect of uncertainty in portfolio flows to Mexico

Arbeitspapier

Economic uncertainty is considered not only one of the main causes of recessions, but also a major obstacle to economic recovery. Recent studies find that significantly high levels of uncertainty could have a non-linear impact that amplifies the response of macroeconomic variables. The objective of this document is to analyze the presence of this impact on portfolio flows to Mexico. The results show that episodes of high uncertainty have a greater negative impact on bond and stock flows than those found under a linear VAR. Furthermore, it is observed that the effect is more persistent for bond flows. Finally, high uncertainty leads to a marked depreciation of the nominal exchange rate, a contraction in economic activity and a fall in the stock index.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2021-11

Classification and Topics

• Classification: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; Economic Impacts of Globalization: Macroeconomic Impacts ; General Financial Markets: General (includes Measurement and Data)
• Subject: Foreign Portfolio Investment ; Mexican Equity and Bond Market ; Uncertainty

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hernández Vega, Marco
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/251282
• Last update: 10.03.2025, 11:44 AM CET