Aggregate Investment in Mexico

Graph of investment share

In the early 1990's, Mexico's level of investment as a share of domestic absorption (the heavy black line in the graph above) was low relative to its level in the early 1980's and low relative to the level of investment in a prospering economy such as Chile's. Concern about the level of investment has often been linked to concern about external resource transfers being used to fund consumption. In the above graph, net resource transfers from Mexico to the rest of the world are shown are red-dotted areas above the black investment line, while net resource transfers to Mexico from the rest of the world are shown as red-dotted areas below the black investment line. While the level of investment rose in the early 1990's along with significant net resource transfers to Mexico, investment rose less than resource transfers. The difference between the two reflects a rise in domestic consumption. More generally, the level of investment has been more stable than the level of external resource transfers.

For a detailed analysis of Mexican consumption, savings, and external resource transfers, see Oks and Wijnbergen.

Topic Mexican Economic Crisis