1. The Price of Violence: Interest Rates and Homicides in Mexico
- Author:
- Ethan B. Kapstein and Tantravahi. Adityamohan
- Publication Date:
- 08-2021
- Content Type:
- Working Paper
- Institution:
- Empirical Studies of Conflict Project (ESOC)
- Abstract:
- Among its many deleterious effects on social well-being, violent conflict can undermine the economies of the countries in which it is ongoing. From a macroeconomic perspective, internal conflict can lead to reduced investment, output, and growth. We show that it can also increase the borrowing costs on government-issued debt. Specifically, we examine the effects of crime-related homicides on the spread between the monetary policy rate and short-term Mexican treasury bills, called ”CETES,” during the period 2010-2017. We show that homicides have a statistically significant effect on the spread, and in drawing a connection between violence and interest rates, we make a novel contribution to the literature on the macroeconomic effects of conflict.
- Topic:
- Political Violence, Crime, Conflict, Violence, Interest Rates, and Macroeconomics
- Political Geography:
- Central America and Mexico