Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296959 
Year of Publication: 
2023
Series/Report no.: 
Working Papers No. 2023-03
Publisher: 
Banco de México, Ciudad de México
Abstract: 
This paper analyzes the effects of the extraordinary measures implemented by the Bank of Mexico during the COVID-19 pandemic on financial conditions. For this purpose, we estimate a factoraugmented vector autoregressive (FAVAR) model for the period 2001-2021. Based on this model, we construct a financial conditions index, estimate the response of this indicator and its components from a shock to the outstanding amount of these measures, and conduct a counterfactual exercise to further analyze the effect of the aforementioned measures. The results indicate that the extraordinary measures seem to have contributed to improve financial conditions. In particular, we find that if these measures had not been implemented, the sovereign risk premium, the 10-year government bond yield, the slope of the yield curve, the long and short-term yield spreads between Mexico and USA, the exchange rate and its volatility would have been higher. In turn, the Mexican stock market index would have been lower.
Subjects: 
Financial Conditions
Central Bank Policies
Factor-Augmented VAR
JEL: 
C32
E58
G01
E44
Document Type: 
Working Paper
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