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External Shocks, Structural Change, and Economic Growth in Mexico 1979–2006

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  • Robert A. Blecker

Abstract

This paper finds that shocks to net financial inflows, world oil prices, the U.S. growth rate, and the lagged real exchange rate explain most of the fluctuations in Mexico’s annual growth since 1979. The paper also estimates how the effects of these external constraints have changed since Mexico’s liberalization policies of the late 1980s and the formation of NAFTA in 1994. Estimates of an investment function and other tests show that growth drives investment but not conversely, in the short run. Inflows of foreign direct investment have positive effects on investment, but the coefficients are small and not always significant.

Suggested Citation

  • Robert A. Blecker, 2008. "External Shocks, Structural Change, and Economic Growth in Mexico 1979–2006," Working Papers 2008-04, American University, Department of Economics.
    • Handle: RePEc:amu:wpaper:0408
    DOI: 10.17606/0t4h-jt39
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    Cited by:

    1. Cheptiş Alexandra, 2022. "The impact of external shocks on economic growth: An empirical study based on the SVAR models," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 16(1), pages 650-659, August.
    2. Carlos A. Ibarra & Robert A. Blecker, 2016. "Structural change, the real exchange rate and the balance of payments in Mexico, 1960–2012," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(2), pages 507-539.
    3. Jim Stanford, 2011. "The North American Free Trade Agreement: Context, Structure and Performance," Chapters, in: Jonathan Michie (ed.), The Handbook of Globalisation, Second Edition, chapter 16, Edward Elgar Publishing.
    4. Carlos A. Ibarra, 2016. "Investment, asset market, and the relative unit labor cost in Mexico," Economic Change and Restructuring, Springer, vol. 49(4), pages 339-364, November.
    5. Biru Paksha Paul, 2013. "Output Relationships in South Asia: Are Bangladesh and India Different from Neighbours?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 14(1), pages 35-57, March.
    6. Hosoe, Nobuhiro, 2022. "Economic de-integration in North America and foreign direct investment from Japan," Japan and the World Economy, Elsevier, vol. 61(C).
    7. Carlos A. Ibarra, 2015. "Investment and the real exchange rate's profitability channel in Mexico," International Review of Applied Economics, Taylor & Francis Journals, vol. 29(5), pages 716-739, September.
    8. Erdoğan, Seyfettin & Yıldırım, Durmuş Çağrı & Gedikli, Ayfer, 2020. "Natural resource abundance, financial development and economic growth: An investigation on Next-11 countries," Resources Policy, Elsevier, vol. 65(C).
    9. Robert A. Blecker & Gerardo Esquivel, 2009. "NAFTA, Trade, and Development," Working Papers 2009-24, American University, Department of Economics.
    10. 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.
    11. Isaac, Sánchez Juárez, 2011. "Una interpretación sobre el bajo crecimiento económico en México [One interpretation of the low economic growth in Mexico]," MPRA Paper 38101, University Library of Munich, Germany.
    12. de Souza, João Paulo A. & Gómez-Ramírez, Leopoldo, 2018. "The paradox of Mexico's export boom without growth: A demand-side explanation," Structural Change and Economic Dynamics, Elsevier, vol. 47(C), pages 96-113.
    13. Rodríguez, Gabriel & Vassallo, Renato & Castillo B., Paul, 2023. "Effects of external shocks on macroeconomic fluctuations in Pacific Alliance countries," Economic Modelling, Elsevier, vol. 124(C).
    14. Guillermo Cruces & Gary S. Fields & David Jaume & Mariana Viollaz, 2015. "The growth-employment-poverty nexus in Latin America in the 2000s: Mexico country study," WIDER Working Paper Series 079, World Institute for Development Economic Research (UNU-WIDER).
    15. Gabriel Rodríguez & Renato Vassallo, 2022. "Time Evolution of External Shocks on Macroeconomic Fluctuations in Pacific Alliance Countries: Empirical Application using TVP-VAR-SV Models," Documentos de Trabajo / Working Papers 2022-508, Departamento de Economía - Pontificia Universidad Católica del Perú.
    16. Lipford Jody W. & Yandle Bruce, 2011. "NAFTA, Environmental Kuznets Curves, and Mexico's Progress," Global Economy Journal, De Gruyter, vol. 10(4), pages 1-20, January.
    17. Guillermo Cruces & Gary S. Fields & David Jaume & Mariana Viollaz, 2015. "The growth-employment-poverty nexus in Latin America in the 2000s: Mexico country study," WIDER Working Paper Series wp-2015-079, World Institute for Development Economic Research (UNU-WIDER).
    18. Ibarra, Carlos A., 2011. "Capital Flows and Real Exchange Rate Appreciation in Mexico," World Development, Elsevier, vol. 39(12), pages 2080-2090.

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    More about this item

    Keywords

    Latin America; Mexico; external shocks; economic growth; investment; financial inflows;
    All these keywords.

    JEL classification:

    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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