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Structural Change, the Real Exchange Rate, and the Balance of Payments in Mexico, 1960-2012

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  • Robert Blecker

Abstract

This paper estimates a structural model of the balance of payments, with disaggregated exports (manufactured and non-manufactured) and imports (final and intermediate goods), and a reduced form model of the trade balance for the Mexican economy. The analysis identifies several structural breaks, implying a division of the entire sample period into five phases. The results indicate that a tightening of the balance-of-payments constraint may account for the slowdown in Mexico’s growth only during certain subperiods of the post-liberalization era, and that the impact of real exchange rate changes on the trade balance has diminished as a result of the increasing integration of export industries into global supply chains. The results also suggest an important asymmetry, whereby a country can grow below the rate consistent with balance-of-payments equilibrium when other constraints are more binding, but cannot sustain growth above that rate. JEL classification: F43, F14, E12, O24

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Paper provided by American University, Department of Economics in its series Working Papers with number 2014-01.

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Date of creation: 2014
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Handle: RePEc:amu:wpaper:2014-01

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Web page: http://www.american.edu/cas/economics/

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