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The COVID-19 Economic Crisis in Mexico through the Lens of a Financial Conditions Index

Julio Carrillo () and García Ana Laura

No 2021-23, Working Papers from Banco de México

Abstract: The COVID-19 pandemic not only generated real shocks affecting economic activity severely, but also a broad uncertainty that unleashed an extreme shock to financial markets. In this paper, we focus on the financial dimension of the pandemic from the viewpoint of an emerging market economy. Accordingly, we estimate a financial conditions index for Mexico since 1993 and find that the acute turmoil generated by the pandemic stands among the four largest episodes of financial distress experienced by the country. In addition, we find evidence suggesting that real variables have responded differently to shocks that worsen financial conditions than to shocks that improve them.

Keywords: COVID-19; financial conditions; emerging-market economy; local projections (search for similar items in EconPapers)
JEL-codes: C11 C32 E44 G01 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-fdg and nep-mac
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