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This paper develops, under the framework of a small, open, and monetary economy, a stochastic model of inflation stabilization taking as a nominal anchor the exchange rate when credibility is imperfect. The agents have expectations driven by two processes: a diffusion-jump process for the devaluation rate where the size of a possible devaluation has an extreme value distribution, and a mean-reverting stochastic volatility process (a continuous version of the GARCH (1,1) model). This appropriately models that inflation is substantially more persistent than the devaluation rate; as showed the stylized facts about extreme devaluations registered in Mexico in 1994 and in Argentina in 2001. It is assumed that there is no a derivatives market to hedge against future devaluations, that is, the financial markets are incomplete. Under this framework, interior and corner solutions are examined when a stabilization plan with imperfect credibility is implemented. It is also studied an experiment in which the mean expected inflation takes a greater value from some time in the future and stays there forever, taking into account the probability that this monetary policy occurs. The case of a stochastic horizon of stabilization with the exponential distribution is studied. Moreover, the real option to postpone consumption is valued when a stabilization plan is to be abandoned. Also, exogenous shocks on consumption and economic welfare are assessed. Finally, the proposed model is used to carry out simulations that reproduce the booms of private consumption before the anti-inflationary plans were abandoned in Mexico in 1990-1994 and in Argentine in 2001-2003, when extreme devaluations took place. [ABSTRACT FROM AUTHOR]

In the framework of a monetary economy with labor and debt (public and private), the effects of government as a promoting agent to boost up technological change are studied. Through a model of endogenous growth, the growth rates of all sectors are characterized in the perfect foresight equilibrium. Moreover, the impact on economic welfare of taxes and government spending to impulse technological change is assessed. Finally, in a simulation exercise, the initial optimal level of government spending (which maximizes welfare), in which the government should incur to adequately address technological change, is examined. [ABSTRACT FROM AUTHOR]

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This paper extends the traditional franchising valuation method based on discounted cash flows towards the framework of real options, which arises naturally as a dynamic stochastic optimization procedure where the franchisor seeks to maximize his/her utility discounted by its cost of capital subject to his/her owned wealth. This wealth includes debt costs and additional costs associated with royalties, that is to say: a lump sum and sales percentage. The latter is modelated as a variable interest rate bond through a mean-reverting process that is assumed to be stochastic and driven by a geometric Brownian motion correlated with profits. It is also shown that the capital structure irrelevance holds when there is a flat interest rate term structure. Finally, on the basis of real options sensibility, some recommendations on business strategies are stated. [ABSTRACT FROM AUTHOR]

This study develops a model of a small, open economy, with perfect capital mobility, which makes it possible to examine the actions of the government in the fiscal and monetary areas, compatible with optimal plans in the private sector. The proposed model considers a representative individual with perfect foresight. The key result is that fiscal and monetary policies consistent with the optimal plans of consumers and rational firms should not generate distortions. [ABSTRACT FROM AUTHOR]

El presente trabajo desarrolla un modelo estocástico de estabilización de precios donde el tipo de cambio actúa como un ancla nominal para contener la inflación. Las expectativas de los agentes económicos sobre la evolución de las tasas de devaluación y de interés real son modeladas con procesos de difusión correlacionados. En ausencia de un mercado de cobertura contra el riesgo cambiario, se examina la dinámica de equilibrio del consumo cuando se implementa un programa anti-inflacionario. Asimismo, se evalúan los efectos en el bienestar producidos por cambios repentinos en los parámetros que determinan las expectativas de devaluación. [ABSTRACT FROM AUTHOR]

This paper develops a model of endogenous growth where the government acts as a promoting agent to boost technology in agribusiness. In the framework of a monetary economy, the optimal level of government spending to enhance technology in the agricultural industry is characterized. Moreover the impact of such a spending on economic welfare is assessed. Finally, a number of agro-oriented policies to increase growth in the sector are established. [ABSTRACT FROM AUTHOR]

This study develops an endogenous growth model in which the government intervenes in the generation of technology. In the framework of a monetary economy the optimum amount of government spending is characterized to promote the technological level, and, as a consequence, economic growth. Meanwhile, it analyzes the impact that this spending has on economic welfare. Finally, some recommendations are made for industrial policy, oriented towards increasing the marginal product of capital. [ABSTRACT FROM AUTHOR]

This paper carries out an analysis of the most common structured notes traded in Financial markets. A detailed description of such financial instruments emphasizing their particular characteristics and technical difficulties in the valuation process is provided. Due to the fact that most of the structured notes traded in the mexican financial markets are certificate deposits with granted capital, we supply the basic elements for their valuation, such as floating coupon-bearing bonds and interest-rate contingent claims. Moreover, for most of the studied structured notes, theoretical pricing models are developed. Finally, for illustrative purposes, several numerical examples of notes are fully developed. [ABSTRACT FROM AUTHOR]

Today, there are a wide variety of ways to produce goods in a manufacturing company. Among the most common are mass or line production and process production, both of which are antagonists. In an online production system, materials move from station to station, receiving added value on a well-defined layout. In a production line by process, the materials randomly visit a set of machines strategically located in order to receive a treatment, almost always through metalwork machines, according to the final product of which they will be part. In this case, there is not a predefined layout, as the incoming materials are sectioned and each piece forms a continuous flow through different workstations to receive some process. This activity depends on the function of the product and its final destination as a component of a finished product. In this proposal, Markov chain theory is used to model a manufacturing system by process in order to obtain the expected values of the average production per machine, the total expected production in all the facilities, the leisure per machine and the total productive efficiency of the system, among other indicators. In this research, we assume the existence of historical information about the use of the equipment, its failures, the causes of failure and their repair times; in any factory, this information is available in the area of manufacturing engineering and plant engineering. From this information, statistical frequency indicators are constructed to estimate transition probabilities, from which the results presented here are derived. The proposal is complemented with a numerical example of a real case obtained from a refrigerator factory established in Mexico in order to illustrate the results derived from this research. The results obtained show their feasibility when successfully implemented in the company. [ABSTRACT FROM AUTHOR]

This research developed a heat map of the Mexican financial system to identify its vulnerabilities. The proposed methodology extends that used by Bank of Mexico (Banxico), and its advantages are: 1) the number of variables is reduced to those originally used by Banxico (from 58 to 23) discarding redundant variables; 2) 22 of the 23 variables are available on public platforms; and 3) the category of "risk appetite" is the item that generates the greatest instability; 4) it generates early warnings of overdue loans and the import index; the latter indicator may have repercussions on Banxico's inflation target. It also discusses how the identified risk factors can be magnified by COVID-19. Finally, the proposed thermal map is novel due to the generation of early warnings, in addition to the fact that such a proposal allows the detection of additional risk elements to those indicated by the Central Bank. [ABSTRACT FROM AUTHOR]

This work developed a dynamic stochastic general equilibrium model about the consumption and investment decisions of a representative risk averse agent, for a small and closed economy, constrained to the market risk of the assets in the portfolio with a finite time horizon of stochastic length. It is assumed that the agent has access to three assets: a stock, whose interest rate is stochastic, an option subscribed on the stock and a risk-free bond. The prices of the assets are quoted in units of the consumer good, and there are no taxes and no transaction costs for the maintenance of the portfolio. The proposed problem is useful to characterize the premium of an American-style Asian put option with floating strike as the solution of a partial differential equation. [ABSTRACT FROM AUTHOR]

This paper examines, through the concept of mutual information based on Shannon's entropy, the impact of monetary policy on the loss of efficiency in the financial markets due to speculative bubbles. The proposed information measure is useful to quantify the efficiency with which stock markets respond to the implementation of monetary policy. The findings show that an increase in both money supply and credit growth, as well as declining interest rates, lead to strong market inefficiencies during the initial periods of formation of a bubble. Moreover, empirical evidence suggests that when a loose monetary policy (money supply is expanded and is accessible to agents to encourage economic growth) generates inefficiencies, its instruments are not effective to realign the performance of financial markets. [ABSTRACT FROM AUTHOR]

This research assesses the impact of informal employment on the wage earning rate (marginal return) of individuals who have Higher Education (HE) in Mexico in the framework of the health contingency due to COVID-19 in 2020, which forced to the closure of a significant number of formal economic activities. HE returns estimation is carried out using the procedure suggested by Heckman et al., (2001) and extended by Mogstad et al., (2020) incorporating multiple instrumental variables and by Pinamang-Acheampong et al., (2022) treating unobserved heterogeneity using an endogenous switching regression model. The information employed for the estimates uses a sample from the National Household Income and Expenditure Survey (ENIGH, Spanish acronym for Encuesta Nacional de Ingresos y Gastos de los Hogares) 2020. Empirical evidence is found that the informal labor market had a drastic negative impact on the wages of individuals with ES. [ABSTRACT FROM AUTHOR]

This paper analyzes several indicators of Mexican commercial banks liquidity and leverage, for the period 2002-2009. The purpose is determinate the relationship with the profitability and the possible patterns in their activities. The results show that the largest banks, according to the size of its assets, are more profitable, but they have more long term leverage and concentrate a significant proportion of their assets in government securities. In contrast, smaller banks have on its assets significant proportions of credit supply, and also have a considerable amount of long term deposits in liabilities. [ABSTRACT FROM AUTHOR]

This paper develops a macroeconometric simulation model for Mexico on a microeconomics basis. This proposal has several distinctive features that makes it different from other models that have been previously elaborated for the Mexican economy. Behavioral relationships are not specified in an ad-hoc manner, but by means of the study of rational behavior of all the economic agents and their interactions with the markets. Through the formulation of intertemporal optimization models, the dynamics of the key macroeconomic variables are determined. Our proposal allows to reproduce stylized facts of the Mexican economy observed between 1995 and 2002. [ABSTRACT FROM AUTHOR]

The Global Fear Index (GFI) is a measure of fear/panic based on the number of people infected and deaths due to COVID-19. This paper aims to examine the interconnection or interdependencies between the GFI and a set of global indexes related to the financial and economic activities associated with natural resources, raw materials, agribusiness, energy, metals, and mining, such as: the S&P Global Resource Index, the S&P Global Agribusiness Equity Index, the S&P Global Metals and Mining Index, and the S&P Global 1200 Energy Index. To this end, we first apply several common tests: Wald exponential, Wald mean, Nyblom, and Quandt Likelihood Ratio. Subsequently, we apply Granger causality using a DCC-GARCH model. Data for the global indices are daily from 3 February 2020 to 29 October 2021. The empirical results obtained show that the volatility of the GFI Granger causes the volatility of the other global indices, except for the Global Resource Index. Moreover, by considering heteroskedasticity and idiosyncratic shocks, we show that the GFI can be used to predict the co-movement of the time series of all the global indices. Additionally, we quantify the causal interdependencies between the GFI and each of the S&P global indices using Shannon and Rényi transfer entropy flow, which is comparable to Granger causality, to confirm directionality more robustly The main conclusion of this research is that financial and economic activity related to natural resources, raw materials, agribusiness, energy, metals, and mining were affected by the fear/panic caused by COVID-19 cases and deaths. [ABSTRACT FROM AUTHOR]

This paper aims to analyze, by using the concept of mutual information, the existing relationship between the nominal exchange rate and different inflation components. The proposed information measure captures the dependence structure between these two variables, resulting in new empirical findings not explored by previous works. Among these findings are: i) existence of bimodal bivariate distributions useful to explain regime changes, and it) increases in dependence between the variables in low-volatility periods and decreases in dependence in uncertain environments, previously measured as pass-through. Moreover, such distributions allow studying the different transmission speeds for each inflation component. [ABSTRACT FROM AUTHOR]

El presente trabajo emplea el algoritmo ovs (Objetos-Variables-Situaciones), con base en un modelo de reconocimiento de patrones, para examinar la evolución de indicadores crecimiento y desarrollo de la economía de México en el contexto de la OCDE, durante el periodo 1950-1993. Los objetivos de la investigación son: 1) proponer un modelo de clasificación que permita identificar sistemáticamente las tendencias de convergencia o divergencia de los indicadores del nivel de vida o bienestar en los países que forman la OCDE; 2) aportar elementos que coadyuven a explicar el desarrollo económico de México; y 3) proporcionar una descripción de la dinámica de México en la economía mundial en el periodo de estudio. [ABSTRACT FROM AUTHOR]

This paper develops two methodological approaches for calculating the float factor of the stock market index (IPC) of the Mexican stock market (BMV). The first one assumes that the free float factor is approximated by the normalization of the daily market rotation of each title, while the second one uses the relative daily market rotation. In both cases, the float factor is simulated by a variable with mean reversion similar to the one proposed in Cox, Ingersoll and Ross' model (1985). The methodologies we have established here remedy the inability to replicate the IPC because of the elements of confidentiality that the float factor currently has. Moreover, the proposed flotation factor can be updated instantly given the nature of the developed models. The paper shows that the weights of the firms in the ipc, calculated by using the formulated methodologies, are substantially different from those provided by the BMV when applying its flotation factor, which contains discretionary components of information difficult to verify. [ABSTRACT FROM AUTHOR]

Este trabajo caracteriza la prima de una opción americana de compra mediante un sistema de ecuaciones diferenciales parciales provenientes de un problema de control óptimo estocástico que modela la toma de decisiones de consumo e inversión de un consumidor racional en un horizonte de planeación con fecha final estocástica. Para ello se supone que el activo subyacente es conducido por el movimiento geométrico browniano en un mundo neutral al riesgo. La valuación se lleva a cabo en términos de cuánto el consumidor estaría dispuesto a pagar por un contrato de opción de compra del tipo americana. [ABSTRACT FROM AUTHOR]

This paper develops a model for pricing European options on the index of the Mexican Stock Exchange assuming that the volatility of the underlying is driven by a GARCH-M (1,1). process. The proposed model combines the characteristics of structural and statistical models; that is, volatility is assumed to follow a GARCH-M (1,1) process calibrated on hisstorical data, but the equilibrium price of the option is based on nonarbitrage arguments. In this context, the model is capable of reflecting properly the changes of the conditional volatility of the underlying asset. The results of the numerical implementation of the model suggest that this is able to explain some systematic biases associated with the model published by Black and Scholes (1973). [ABSTRACT FROM AUTHOR]

Family networks have increased at an accelerated pace through social networking through social networking services, online platforms, and social media clubs. This paper develops a model of an economy populated by networks of families with similar preferences (the same functional form of the felicity or utility function) but family members differ in their deep parameters (compulsion for consumption and risk tolerance), which, in turn, leads to some kind o heterogeneity among the families. In this context, the problem of felicity (utility) maximization of the average family in the network is solved. The optimal path of consumption is obtained for the average family and graphical comparative static exercises are performed. Finally, the economic welfare of the typical family in a network is calculated and comparative static experiments are carried out. This approach improves the understanding of the consumption decision making of families interacting in social networking services. [ABSTRACT FROM AUTHOR]

Background and objective: The Mexican automotive industry has become one of the strongest in the world, it generates significant contributions to the gross domestic product, and creates direct and indirect jobs, which promotes the entry of foreign direct investment. This article assesses the impact of the automotive industry on the Mexican economy. Methodology: The role of the automotive industry in the economic structure and its impact on investment flows are assessed through social accounting matrices. Under the proposed methodology, the classification of sectors and the impact and employment multipliers are obtained. Subsequently, an investment shock is introduced to analyze its effect on Mexico's main economic indicators. Empirical results: The classification of sectors indicates that the automotive industry is not strongly linked to the national economy. The accounting multipliers show that the sector has a very weak sensitivity to changes in the rest of the accounts. Job multipliers classify it as an industry with a high labor productivity index. Finally, by simulating an investment shock for expansion, it is shown that the connection with the rest of the economy is stronger and generates greater capital flows with the rest of productive activities. Limitations: There is only complete and reliable data for social accounting matrices for 2012 in Mexico updated for the automotive sector. Conclusions: The automotive industry develops in isolation from the rest of the economic activity, however, empirical evidence shows that the impact that this sector has on the rest of the economy in the face of investment flows is stronger, and, in turn, those activities, which are keys within this expansion process, are identified. [ABSTRACT FROM AUTHOR]

This paper is aimed at obtaining estimates of pension coverage or retirement retreat indicators for the Mexican population over 65 years, and assessing the impact of pension systems in transitions to retirement of adults in middle and advanced ages in Mexico. To do this, microeconomic data from the Mexican National Survey of Health and Aging are used. The econometric analysis carried out is focused on identifying socio-demographic, economic, and institutional factors that are associated with having access to a retirement pension or to rely on other sources of income. Moreover, the relationship between social protection and labor market is examined. The main result of this research is that in Mexico the transition to retirement from the labor market in the advanced stages of the life cycle, measured by having access to retirement pensions, are limited due to the characteristics of highly contributory pension schemes, which favor the population with formal and more stable career paths associated to: 1) gender characteristics, 2) educational opportunities and 3) potential integration into the labor market.