Capital flows, real exchange rate, and growth constraints in Mexico
AbstractBesides its well‐known problem of slow economic growth, Mexico’s recent evolution features both a sharp rise in the import‐intensity of economic activity -- which may have tightened an external constraint on growth -- and a persistent real appreciation of the peso -- which may have created a profitability constraint. Adopting the approach of gap models and growth diagnostics, the paper contrasts the relevance of the external and the profitability constraints in Mexico after trade liberalization in the mid‐1980s. Although the trade deficit was pro‐cyclical, the three recent episodes of GDP growth acceleration were not accompanied by pressures in the foreign exchange market. Moreover, error correction models show that investment was highly responsive to the real exchange rate but largely unresponsive to foreign capital flows. The evidence supports the conclusion that investment was deterred by the low profitability of an uncompetitive real exchange rate, rather than by the external constraint.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal International Review of Applied Economics.
Volume (Year): 25 (2011)
Issue (Month): 6 (November)
Contact details of provider:
Web page: http://www.tandfonline.com/CIRA20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Blecker, Robert A. & Ibarra, Carlos A., 2013.
"Trade liberalization and the balance of payments constraint with intermediate imports: The case of Mexico revisited,"
Structural Change and Economic Dynamics,
Elsevier, vol. 25(C), pages 33-47.
- Robert A. Blecker & Carlos A. Ibarra, 2013. "Trade liberalization and the balance of payments constraint with intermediate imports: the case of Mexico revisited," Working Papers 2013-02, American University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.