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Exporting without growing: Investment, real currency appreciation, and export-led growth in Mexico

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  • Carlos Ibarra
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    Abstract

    Despite two positive developments - the rise of manufactured exports and a prolonged but eventually successful disinflation - Mexico failed to sustain a high rate of economic growth during its free-trade period 1988-2006. The paper argues that the proximate cause of Mexico's growth failure is the low dynamism of investment, which resulted from the high share of maquila (or assembly goods) in manufactured exports and the real appreciation of the peso during disinflation. The argument is supported by two strands of evidence: an aggregate-demand decomposition that measures the contributions of investment and exports to GDP growth, and the estimation by Johansen's methodology of two- and three-equation cointegration models that show the effect of manufactured exports and the real exchange rate on total investment.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09638190802593418
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

    Volume (Year): 19 (2010)
    Issue (Month): 3 ()
    Pages: 439-464

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    Handle: RePEc:taf:jitecd:v:19:y:2010:i:3:p:439-464

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    Web page: http://www.tandfonline.com/RJTE20

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    Related research

    Keywords: export-led growth; real currency appreciation; real exchange rate; investment determinants; Johansen's cointegration methodology; Mexico;

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    Cited by:
    1. 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.
    2. Robert Blecker, 2014. "Structural Change, the Real Exchange Rate, and the Balance of Payments in Mexico, 1960-2012," Working Papers 2014-01, American University, Department of Economics.
    3. Fullerton, Thomas M., Jr. & Kababie, Kababie & Boehmer, Charles R., 2012. "International trade and economic growth in Mexico," MPRA Paper 42991, University Library of Munich, Germany.
    4. Carrasco, Carlos A., 2013. "El Nuevo Consenso Macroeconómico y la mediocridad del crecimiento económico en México
      [New Consensus Macroeconomics and the mediocrity of economic growth in Mexico]
      ," MPRA Paper 53391, University Library of Munich, Germany.

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