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The Mexican intertemporal budget constraint: Persistent signals of an eventual collapse

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Author Info

  • José A. Núñez

    (Tecnológico de Monterrey, Campus Ciudad de México)

  • Carlos M. Urzúa

    (El Colegio de México and Tecnológico de Monterrey)

Abstract

This paper examines the sustainability of the Mexican current account deficit prior to the December 1994 crisis. It tests whether or not the Mexican economy was satisfying its intertemporal budget constraint, and finds that signals of possible trouble without a change in policies were present long before the crisis. The tests used are based on the Wickens-Uctum criterion for the sustainability of current account deficits, extended to include the case of possible interventions.

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File URL: http://codex.colmex.mx:8991/exlibris/aleph/a18_1/apache_media/5VNBBFKCMPFNKFAUQV7USPL2STFEV3.pdf
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Bibliographic Info

Article provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.

Volume (Year): 11 (1996)
Issue (Month): 2 ()
Pages: 167-180

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Handle: RePEc:emx:esteco:v:11:y:1996:i:2:p:167-180

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Web page: http://www.colmex.mx/centros/cee/
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Keywords: intertemporal budget constraint; current account; sustainability of current account deficit; Mexico;

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  1. Guillermo A. Calvo & Enrique G. Mendoza, 1996. "Mexico's balance-of-payments crisis: a chronicle of death foretold," International Finance Discussion Papers 545, Board of Governors of the Federal Reserve System (U.S.).
  2. Charles Engel & Craig S. Hakkio, 1994. "The distribution of exchange rates in the EMS," Research Working Paper 94-03, Federal Reserve Bank of Kansas City.
  3. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  4. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 253-316.
  5. Trehan, Bharat & Walsh, Carl E., 1988. "Common trends, the government's budget constraint, and revenue smoothing," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 425-444.
  6. Wickens, M. R. & Uctum, Merih, 1993. "The sustainability of current account deficits : A test of the US intertemporal budget constraint," Journal of Economic Dynamics and Control, Elsevier, vol. 17(3), pages 423-441, May.
  7. Lawrence J. Christiano, 1988. "Searching For a Break in GNP," NBER Working Papers 2695, National Bureau of Economic Research, Inc.
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