The value of institutional trust among economic agents in Mexico: Theory and facts

Abstract

The confidence of economic agents is supported by institutional conditions; however, when these are inefficient, the fall in confidence would cause adverse effects on the economy. This article examines the level of trust that agents assign to economic and social institutions in the period of political transition in Mexico from 2001 to the present. Using an unrestricted VAR model, the relationship between gross investment and consumer and business confidence indexes is analyzed. To identify the integration order of the variables, three unit root tests were performed. The results of the Granger causality test, to analyze the dependence between the variables, suggest that the investment is caused by changes in consumer confidence and in the confidence of businessmen. It is concluded that improving institutional confidence would favor the performance of the Mexican economy.