This paper analyses the effects of the extraordinary measures implemented by the Central Bank of Mexico during the COVID-19 pandemic on financial conditions. For this purpose, we estimate a factor-augmented vector autoregressive 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 analyse the effect of the aforementioned measures. The main results indicate that these 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, and the long- and short-term yield spreads between Mexico and the US would have been higher by around 56, 31, 27, 37, and 49 basis points in December 2020, respectively. At the same time, the Mexican peso/US dollar exchange rate and its volatility would have been higher by 5 and 2 percentage points, respectively. In turn, the Mexican stock market index would have been lower by 10 percentage points. 

This paper analyses recent changes in the relative importance of the determinants of capital flows to emerging market economies. For this purpose, we estimate vector autoregressive (VAR) models for the period 2009–2021. Based on these models, we estimate the effects on debt flows from shocks to their determinants. Then, we quantify the contribution of each of the variables included in the model to explain the evolution of these flows in each month of the sample through a historical decomposition analysis. The main results indicate that the contribution of global risk aversion to explain the evolution of debt flows increased during March 2020 compared to the past, although its relative importance has decreased since, particularly as central banks in systemically important economies restored liquidity and the performance of financial markets improved. 

How much tax revenue can be raised in developing countries with a large informal sector? In this paper, we introduce informality into a two-sector neoclassical growth model and characterize the Laffer curves under labor, consumption, and capital income taxation. The model is calibrated for five Latin American countries: Brazil, Chile, Colombia, Mexico, and Peru, and we quantify how informality affects the fiscal space under each tax rate. We show that the peak of the Laffer curves crucially depends on the elasticity of substitution between formal and informal goods. For commonly used values of this elasticity, the tax revenue implications of informality are found to be severe. Using labor taxes, Colombia, Mexico, and Peru can only increase tax revenues within the range 2%−4%. While Chile can maximally increase tax revenues by 11% with higher labor taxes, Brazil can increase tax revenues by 6% by cutting labor taxes. The budgetary gains under capital income taxation are found to be even smaller, where the fiscal space does not exceed 4% in any country. Using consumption taxes, Mexico and Chile can maximally increase tax revenues by 8% and 3%, respectively. For the remaining countries, the fiscal space is found to be less than 1%. Finally, the iso-revenue analysis suggests that in order to maximize total tax receipts in Latin America, governments should in general raise labor and consumption taxes and cut capital income taxes. 

In this paper we study the incidence of poverty and inequalities in the Pacific Coast of Colombia. The document aims to understand the reasons why this region has been lagging behind others. To this end, we conduct a diagnostic of poverty measures such as: poverty line, Unsatisfied Basic Needs Index, Multidimensional Poverty Index, and effort required to reduce the socioeconomic gaps. The results show that regardless of the indicator used, the region is characterized by a high incidence of poverty, which is more salient in the municipalities of Chocó and Cauca. Finally, to understand why the high incidence of poverty is persistent we discuss the aspects related to human capital, public expenditure and armed conflict. We conclude that a most of the population in the region suffer from a "poverty trap" that refrains them to achieve a higher development. 

In this paper we conduct a study of poverty, focusing on the analysis of the material conditions, as measured by the Unsatisfied Basic Needs Index, for census periods 1973, 1985, 1993 and 2005. We propose a way to measure the degree of prevalence of poverty traps, exclusion, vulnerability and the escape of critical conditions of poverty, according to the approach by Deaton (2015) in the book “The Great Escape: Health, Wealth, and the Origins of Inequality”. The results point to the existence of a core-periphery pattern in the prevalence of poverty. The predominance of vulnerability and exclusion, as well as the existence of those left behind, are more prevalent in the Caribbean and Pacific regions, which happen to be the places with the highest required efforts to close the social gaps. 

This paper analyzes whether there exists a relationship between the slope of the yield curve and future economic activity in Mexico for the period 2004–2019. In particular, we evaluate whether such a relationship depends on the term premium. For this purpose, we estimate a threshold model in which the relationship between the yield spread and economic activity, measured as either output growth or the probability of a contraction, depends on whether the term premium is above or below a certain threshold. The main results indicate that the slope of the yield curve seems to anticipate the behavior of economic activity only when the term premium is above a threshold. Our results also suggest that the slope of the yield curve has predictive power over the probability of facing a contraction in the future only when the term premium is above a threshold.