Macroeconomic Effects of Capital Flows: The Case of Mexico
Mexico has been paradigmatic of the trends that international capital flows to developing countries have followed during the last 25 years. Most of the 1980s were defined by a situation of minimal access to foreign resources and significant ‘flight’ of domestic capital, as a consequence of the 1982 debt crisis. Later, during the boom of the early 1990s, the country became a major destination for foreign capital. This was a period when portfolio investment in particular, rather than bank loans as had been previously the case, became the major source of non-FDI flows. Finally, the domestic financial crisis of 1995, triggered by the peso devaluation of December 1994, gave way to yet another phase in the evolution of capital flows. While FDI has surged, other types of flows have been comparatively small, though they have shown great volatility, leading to quarterly levels which in absolute terms could be as high as those associated with FDI.
KeywordsIncome Peris Volatility OECD Tame
Unable to display preview. Download preview PDF.
- Furman, J. and J.E. Stiglitz (1998) Economic Crises: Evidence and Insights from East Asia, Brookings Papers on Economic Activity no 2. Washington, DC: Brookings Institution, pp. 1–135.Google Scholar
- Galindo, A. and A. Izquierdo (2003) Sudden Stops and Exchange Rate Strategies in Latin America, Inter-American Development Bank Working Paper no. 484, Washington, DC. February.Google Scholar
- Gavin, M., R. Hausmann and L. Leiderman (1996) ‘The Macroeconomics of Capital Flows to Latin America: Experience and Policy Issues’, in Hausmann, R. and L. Rojas-Suárez (eds), Volatile Capital Flows. Taming Their Impact on Latin America. Inter-American Development Bank, Washington, DC, pp. 1–40.Google Scholar
- Iwata, S. and E. Tanner (2003) Pick Your Poison: The Exchange Rate Regime and Capital Account Volatility in Emerging Markets, IMF Working Paper no. 03/92, Washington, DC.Google Scholar
- Lustig, N. and J. Ros (1999) ‘Economic reforms, stabilization policies and the “Mexican disease” ’, in Taylor (ed.), After Neoliberalism. University of Michigan Press.Google Scholar
- Mattar, J., J.C. Moreno-Brid and W. Peres (2002) Foreign Investment in Mexico after Economic Reform, ECLAC Estudios y Perspectivas 10, July.Google Scholar
- Montiel, P. and C.M. Reinhart (2001) ‘The Dynamics of Capital Movements to Emerging Economies During the 1990s’, in Griffith-Jones, S., M.F. Montes and A. Nasution, (eds), Short-term Capital Flows and Economic Crises, UNU/WIDER Studies in Development Economics. Oxford University Press.Google Scholar
- Ocampo, J.A. (2000) Developing Countries’ Anti-cyclical Policies in a Globalized World, ECLAC United Nations, Temas de Coyuntura Series no. 13, November.Google Scholar
- Prasad, E., K. Rogoff, S.J. Wei and M.A. Kose (2003) Effects of Financial Globalization on Developing Countries: Some Empirical Evidence. International Monetary Fund, Washington, DC, March.Google Scholar
- Schwartz, M.J. (1994) ‘Exchange Rate Bands and Monetary Policy: The Case of Mexico’ Economía Mexicana, 3(2), 287–317.Google Scholar
- Trigueros, I. (1998) ‘Capital Inflows and Investment Performance: Mexico’, in French-R.F., Davis and H. Reisen (eds), Capital Flows and Investment Performance. Lessons from Latin America. ECLAC and OECD Development Centre Studies, Paris, pp. 193–214.Google Scholar