Trade Policy Uncertainty and its Effect on Foreign Direct Investment: Evidence from Mexico

Cebreros, Alfonso; Salcedo, Alejandrina; Chiquiar, Daniel; Heffner-Rodríguez, Aldo

doi:10.36095/banxico/di.2020.14

Cited by 7 publications

(8 citation statements)

References 15 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…They find that global uncertainty is associated with a reduction in portfolio and other investment flows. Lastly, Cebreros et al (2020) show that trade policy uncertainty has significant negative effects on FDI being such effects stronger in states where exporting plays a major role.…”

Section: Introductionmentioning

confidence: 91%

The Nonlinear Effect of Uncertainty in Portfolio Flows to Mexico

Vega¹

2021

View full text Add to dashboard Cite

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.

show abstract

Section: Introductionmentioning

confidence: 91%

The Nonlinear Effect of Uncertainty in Portfolio Flows to Mexico

Vega¹

2021

View full text Add to dashboard Cite

show abstract

“…The impact of these shocks on developing country firms engaged in the global value chain is an emerging area of research. One novel study in this regard shows that foreign direct investment into Mexico declines with trade policy uncertainty; the authors demonstrate this by leveraging data from Google trends to form a trade policy uncertainty index [12].…”

Section: Offshoring and Policies Targeting Intermediate Goods Tradementioning

confidence: 99%

Offshoring and labor markets in developing countries

Basu¹,

Chau²

2022

izawol

View full text Add to dashboard Cite

Developing countries' position along the global value chain has gradually transitioned from low-skill producers of intermediate goods, to hubs of business service providers, and more recently to manufacturing bases of highskilled tasks including computer programming and medical professional services. Given this backdrop, what are the labor market consequences and policy implications of offshoring for developing countries? Research suggests the need for a nuanced view, highlighting a need for policymakers to consider tradeoffs along four dimensions: tradeoffs in economic efficiency, employment and productivity growth versus wage inequality, labor standards, and impacts from trade policy. ELEVATOR PITCHDeveloping countries are often seen as unquestionable beneficiaries in the phenomenal rise of global value chains in international trade. Offshoring-the cross-border trade in intermediate goods and services which facilitate country-level specialization in subsets of production tasks-enables an early start in global trade integration even when the requisite technology and knowhow for cost-effective production from scratch to finish are not yet acquired. A growing economics literature suggests a more nuanced view, however. Policymakers should be mindful of issues related to inequality across firms and wages, labor standards, and effects of trade policy. KEY FINDINGS ConsOffshoring can induce unequal distributional consequences with adverse impact on small-and medium-sized firms. Wage inequality between skilled and unskilled workers may grow in countries providing offshoring activities. Workers in offshoring firms often perform monotonous jobs under poor conditions, and do not gain durable or marketable skills. Countries become more susceptible to trade policy and trade cost uncertainty, and incentives to launch import barriers can be altered due to participation in global value chains. ProsGlobal input realignment leads to mutually beneficial efficiency gains for participating countries. Offshoring can lead to employment and wage gains due to rising labor demand and productivity effects. Countries participating in offshoring experience growth in high-quality jobs that can incentivize skill upgrades. Suppliers of intermediate goods are typically subject to lower tariffs than those providing final goods. The rise and fall of global sourcingNote: The chart plots the share of intermediate exports in total exports (intermediate and final) over time.

show abstract

“…Moreover, the model is enriched with backward looking components in each equation to better capture the inertia found in the data for inflation and the output gap 5 As we focus on Mexico, it is noteworthy that according to the most recent Triennial Central Bank survey by the Bank for International Settlements (2019), the Mexican peso is the second most traded emerging-market currency, only after the Chinese Renminbi but as mentioned by López-Noria and Busch (2021), increased uncertainty has implied greater exchange rate volatility since 1999. Also, trade policy uncertainty has negatively affected the Mexican economy through FDI flows (Cebreros et al 2020). 6 Sidaoui and Ramos-Francia (2008) use the model to show how the monetary tranmission mechanism operates in Mexico and how has it evolved over time.…”

Section: The Modelmentioning

confidence: 99%

Optimal robust monetary policy in a small open economy

Marine¹,

Espidio²

2022

View full text Add to dashboard Cite

En este documento estudiamos una política monetaria óptima y robusta para una economía pequeña y abierta. El enfoque de control robusto supone que los agentes económicos no pueden asignar probabilidades a un conjunto de modelos factibles; por lo tanto, se enfoca en la peor especificación posible de un modelo de referencia. Nuestros resultados sugieren que la implementación de una política monetaria óptima y globalmente robusta es limitada, debido a que las desviaciones del modelo de referencia conducen a múltiples equilibrios. Segundo, cuando el banco central considera incertidumbre exclusivamente en la curva IS o en la condición UIP, el espacio de soluciones únicas se expande. Así, el banco central reacciona de manera más agresiva a choques de demanda o de tipo de cambio real cuando es robusto a errores de especificación en la curva IS. Finalmente, encontramos que la política monetaria robusta está restringida por la persistencia de la inflación y el bajo traspaso del tipo de cambio a los precios. Destaca la importancia de anclar las expectativas de inflación.

show abstract

Trade Policy Uncertainty and its Effect on Foreign Direct Investment: Evidence from Mexico

Cited by 7 publications

References 15 publications

The Nonlinear Effect of Uncertainty in Portfolio Flows to Mexico

The Nonlinear Effect of Uncertainty in Portfolio Flows to Mexico

Offshoring and labor markets in developing countries

Optimal robust monetary policy in a small open economy

Contact Info

Product

Resources

About