Effects of Macroeconomic and Global Variables on Stock Market Performance in Mexico and Policy Implications

Yu Hsing, Antoinette S. Phillips, Carl Phillips

Abstract


Based on a sample during 1985.Q4-2011.Q2 and applying the exponential GARCH model, we find that the stock market index in Mexico is positively associated with real GDP, the peso/USD exchange rate, the M3/GDP ratio and the U.S. stock market index and negatively affected by the interest rate, the ratio of the government deficit to GDP and the expected inflation rate. Hence, a stronger domestic economy, a lower interest rate, a weaker peso, more money supply as a percent of GDP, fiscal prudence, a stronger U.S. stock market and a lower inflation rate would help stock market performance in Mexico.

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DOI: http://dx.doi.org/10.5296/rae.v5i4.4717

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