Evidence on the determinants of investment in Mexico (1993-2016)

What is it about?

The aim of this paper is to show evidence of the determining factors of investment decisions in Mexico, for this, we discuss the importance of the level of economic activity as the main determinant, and the variables that derivate from this one such as investor expectations and costs such e.g. the exchange rate. We emphasize the importance of the rate of return on investment and the zero effect of the interest rate on the investment. Finally, an ARDL model is presented, which confirms that the level of economic activity is the main cause, the exchange rate influences inversely and there is evidence of a crowding-out effect in the Mexican economy.

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