Inflation in the Mexican stock market 2009-2019: the impact of investment flows
DOI:
https://doi.org/10.24275/uam/azc/dcsh/ae/2022v37n95/DominguezKeywords:
Financial Assets Inflation, Foreign Investment, Retirement Funds, Stock MarketAbstract
Our hypothesis is that capital flows create inflationary processes in the Mexican securities market, which is theoretically associated with instability conditions that hinder the financing of real investment. Results of a distributed-lag model (ARDL), applied to the period 2009-2019, indicate that foreign equity investment is positively related to the deviation of share prices from their long-term inflation trend, providing an empirical proof of stock market inflation. Meanwhile, flows coming from the Mexican retirement funds are negatively related, functioning as price market shock-absorbers, arguably because of its long run investment strategy. These findings constitute evidence to open a research agenda on financial policies to improve the contribution of retirement funds in the productive sector financing. 4
JEL Classification: C32; E12; E44; G15; G23.
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