ESOC Working Paper #26 - The Price of Violence: Interest Rates and Homicides in Mexico
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.
Kapstein, E. and Tantravahi, A. (2021). The Price of Violence: Interest Rates and Homicides in
Mexico (ESOC Working Paper No. 26). Empirical Studies of Conflict Project. Retrieved [July
27, 2021], from http://esoc.princeton.edu/wp26.