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Industry trade between Canada and Mexico: Will a weakening peso help Mexican manufacturing in the long run?

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Author Info

  • Bahmani-Oskooee, Mohsen
  • Bolhassani, Marzieh
  • Hegerty, Scott W.

Abstract

Mexico has longed served as one of Canada's major trade partner, but the plunging peso has had drastic effects across North America. This study investigates the bilateral trade relationship between Canada and Mexico for 27 individual industries, from 1973 to 2006. Cointegration analysis shows that overall sensitivity to the real exchange rate is weak, but that the trade balances of certain manufacturing industries do indeed improve after a currency depreciation. The "J-curve" effect is present for certain electrical and mechanical industries, suggesting that the recent decline of the peso may currently be having a negative impact on Mexican trade--but that it might eventually be beneficial, particularly for the Machinery and Transport Equipment sector.

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Bibliographic Info

Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 22 (2011)
Issue (Month): 2 (August)
Pages: 89-101

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Handle: RePEc:eee:ecofin:v:22:y:2011:i:2:p:89-101

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Web page: http://www.elsevier.com/locate/inca/620163

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Keywords: J-curve Canada Mexico Bounds testing Industry data;

References

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Cited by:
  1. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott W., 2013. "The effects of exchange-rate volatility on commodity trade between the U.S. and Brazil," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 70-93.
  2. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott, 2013. "Currency depreciations and the U.S.–Italian trade balance: Industry-level estimates," Research in Economics, Elsevier, vol. 67(3), pages 215-225.
  3. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott W., 2014. "Industry trade and exchange-rate fluctuations: Evidence from the U.S. and Chile," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 619-626.

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