Are the Mexican States and the United States Business Cycles Synchronized? Evidence from the Manufacturing Production

This paper analyses the degree of synchronization between the Mexican states and the US business cycles by using a growth cycle approach for the period 1997-2007. The business cycle indicators are obtained from seasonally-adjusted monthly manufacturing production. Our results confirm that the Mexican aggregate cycle is highly synchronized with the US business cycle. However, although specific Mexican state cycles are pro-cyclical with respect to the US business cycle, their synchronization is very heterogeneous. In particular, it is strong and robust only for the states of Baja California, Jalisco, Nuevo León and the Federal District, and at least moderate for the state of Mexico and Querétaro. The results are robust with respect to three different detrending methods. Synchronization may be explained by the high volumes of international trade carried out by foreign firms in the case of the central and traditionally industrialized states, and by the “maquila” production in the Northern bordering states. This synchronization may be explained by the vertical integration of the productive processes resulting from the internationalization of production of multinational firms.