Banco De México and Recent Developments in Domestic Public Debt Markets

Abstract

This paper describes major policy actions that have recently contributed to the development of the Mexican domestic-currency debt market, and concomitant benefits. Among the most important are a significant reduction in exchange-rate exposure and a decline in refinancing risk for the government and private sectors alike. Another positive outcome of the development of government securities markets has been investor base diversification. This paper explains how capital inflows have translated into larger and more stable foreign investor participation in local debt markets. Empirical evidence presented suggests that these capital inflows have had positive funding implications, lowering both interest-rate levels and volatility.

Full publication: Fiscal Policy, Public Debt and Monetary Policy in Emerging Market Economies

Keywords: Public debt management, financial markets, Latin America

JEL Classification: H63, E63, N26