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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)

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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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Publisher 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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Related research
Keywords: intertemporal budget constraint; current account; sustainability of current account deficit; Mexico;

Other versions of this item:

Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation

References listed on IDEAS
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  1. 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.
    Other versions:
  2. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
    Other versions:
  3. Christiano, Lawrence J, 1992. "Searching for a Break in GNP," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 237-50, July.
    Other versions:
  4. 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.). [Downloadable!]
    Other versions:
  5. 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. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
    Other versions:
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