The effect of the exchange rate on the Mexican stock exchange (BMV): 1995 - 2011

Abstract

This research empirically examines the relationship between exchange rate and the Mexican Stock Exchange from January 1995 to December 2011. To make the empirical study were applied: unit root tests, posed a multiple regression model and applied Granger causality tests. The results showed a significant and inverse effect of the exchange rate on the capital market, which means that the flow of foreign capital have entered the country as portfolio investment, have influenced the appreciation of the peso (low Tc) of these are led to capital markets, providing liquidity and increases the demand for shares and a constant supply in the short term, prices of capital assets increase. We found that there is unidirectional relationship capital market exchange rate and not the reverse.