Advanced Search
MyIDEAS: Login to save this paper or follow this series

Bilateral Trade and Business Cycle Synchronization: Evidence from Mexico and United States Manufacturing Industries

Contents:

Author Info

  • Manuel Ramos Francia
  • Daniel Chiquiar

Abstract

We provide evidence that production-side links between Mexico and U.S. manufacturing sectors became stronger after NAFTA was enacted and, as a consequence, business cycles in these countries became more synchronized. This suggests that the positive effect of bilateral trade on business cycle synchronization found in previous studies for the case of industrial countries may also hold for industrial and less developed country pairs. The recent entry of other unskilled labor-abundant countries into global trade, however, seems to be affecting Mexico's competitiveness in some industries and causing Mexico to be losing market share in the U.S. import market. As a consequence, this event could lead to a permanent negative shift in Mexico's manufacturing output levels, relative to the U.S., and could possibly weaken the degree of business cycle synchronization between these countries. A related effect is shown to be that, in some industries where strong Mexico-U.S. production-sharing links persist, overall North American output is apparently being affected by the global movement of these activities towards the Asian block.

Download Info

If 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.
File URL: http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/%7BBD434B39-5D93-F5C5-AF37-8B25297173F8%7D.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Banco de México in its series Working Papers with number 2004-05.

as in new window
Length:
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:bdm:wpaper:2004-05

Contact details of provider:
Web page: http://www.banxico.org.mx
More information through EDIRC

Related research

Keywords: Business Cycle Synchronization; Trade Integration; NAFTA;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
  2. Fidrmuc, Jarko, 2001. "The Endogeneity of optimum currency area criteria, intraindustry trade and EMU enlargement," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 8/2001, Bank of Finland, Institute for Economies in Transition.
  3. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 277-301, March.
  4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 251-76, March.
  5. César Calderón & Alberto Chong & Ernesto Stein, 2002. "Trade Intensity and Business Cycle Synchronization: Are Developing Countries Any Different?," Working Papers Central Bank of Chile, Central Bank of Chile 195, Central Bank of Chile.
  6. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(1), pages 99-125, January.
  7. Ploberger, Werner & Kramer, Walter, 1992. "The CUSUM Test with OLS Residuals," Econometrica, Econometric Society, Econometric Society, vol. 60(2), pages 271-85, March.
  8. Quintos, Carmela E & Phillips, Peter C B, 1993. "Parameter Constancy in Cointegrating Regressions," Empirical Economics, Springer, Springer, vol. 18(4), pages 675-706.
  9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, Econometric Society, vol. 59(6), pages 1551-80, November.
  10. Gene M. Grossman & Elhanan Helpman, 1994. "Technology and Trade," NBER Working Papers 4926, National Bureau of Economic Research, Inc.
  11. Gerlach, H M Stefan, 1988. "World Business Cycles under Fixed and Flexible Exchange Rates," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 20(4), pages 621-32, November.
  12. James H. Stock & Mark W. Watson, 1998. "Business Cycle Fluctuations in U.S. Macroeconomic Time Series," NBER Working Papers 6528, National Bureau of Economic Research, Inc.
  13. Hao, K. & Inder, B., 1994. "A Diagnostic Test for Structural Change in Cointegrated Regression Models," Monash Econometrics and Business Statistics Working Papers, Monash University, Department of Econometrics and Business Statistics 19/94, Monash University, Department of Econometrics and Business Statistics.
  14. Daniel Levy, 2002. "Cointegration in Frequency Domain," Emory Economics, Department of Economics, Emory University (Atlanta) 0209, Department of Economics, Emory University (Atlanta).
  15. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 944, Cowles Foundation for Research in Economics, Yale University.
  16. Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
  17. Gordon H. Hanson, 1994. "Localization Economies, Vertical Organization and Trade," NBER Working Papers 4744, National Bureau of Economic Research, Inc.
  18. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers, University of California, Davis, Department of Economics 986, University of California, Davis, Department of Economics.
  19. Artis, Michael J & Zhang, Wenda, 1999. "Further Evidence on the International Business Cycle and the ERM: Is There a European Business Cycle?," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 120-32, January.
  20. Ng, Francis & Yeats, Alexander, 1999. "Production sharing in East Asia : who does what for whom, and why?," Policy Research Working Paper Series 2197, The World Bank.
  21. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, Econometric Society, vol. 55(5), pages 1035-56, September.
  22. Julia Campos & Neil R. Ericsson & David F. Hendry, 1993. "Cointegration tests in the presence of structural breaks," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 440, Board of Governors of the Federal Reserve System (U.S.).
  23. Clark, Todd E. & van Wincoop, Eric, 2001. "Borders and business cycles," Journal of International Economics, Elsevier, Elsevier, vol. 55(1), pages 59-85, October.
  24. Ogaki, Masao & Park, Joon Y., 1997. "A cointegration approach to estimating preference parameters," Journal of Econometrics, Elsevier, Elsevier, vol. 82(1), pages 107-134.
  25. S.M. Shafaeddin, 2002. "The Impact Of China´S Accession To Wto On The Exports Of Developing Countries," UNCTAD Discussion Papers, United Nations Conference on Trade and Development 160, United Nations Conference on Trade and Development.
  26. Donald W.K. Andrews & Jae-Young Kim, 2004. "End-of-Sample Cointegration Breakdown Tests," Yale School of Management Working Papers, Yale School of Management ysm344, Yale School of Management.
  27. Gereffi, Gary, 1999. "International trade and industrial upgrading in the apparel commodity chain," Journal of International Economics, Elsevier, Elsevier, vol. 48(1), pages 37-70, June.
  28. D. W. K. Andrews, 2003. "End-of-Sample Instability Tests," Econometrica, Econometric Society, Econometric Society, vol. 71(6), pages 1661-1694, November.
  29. Harris, David & McCabe, Brendan & Leybourne, Stephen, 2002. "Stochastic cointegration: estimation and inference," Journal of Econometrics, Elsevier, Elsevier, vol. 111(2), pages 363-384, December.
  30. Torres, Alberto & Vela, Oscar, 2003. "Trade integration and synchronization between the business cycles of Mexico and the United States," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 14(3), pages 319-342, December.
  31. Anderson, H.M. & Kwark, N.-S. & Vahid, F., 1999. "Does International Trade Synchronize Business Cycles?," Monash Econometrics and Business Statistics Working Papers, Monash University, Department of Econometrics and Business Statistics 8/99, Monash University, Department of Econometrics and Business Statistics.
  32. Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(1), pages 45-59, January.
  33. Gonzalo, Jesus & Granger, Clive W J, 1995. "Estimation of Common Long-Memory Components in Cointegrated Systems," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 13(1), pages 27-35, January.
  34. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  35. M. Ayhan Kose and Kei-Mu Yi, 2001. "Can Trade Theory Help Us Understand the Linkages Between International Trade and Business Cycles?," Computing in Economics and Finance 2001, Society for Computational Economics 135, Society for Computational Economics.
  36. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics, International Economics Section, Departement of Economics Princeton University, 74, International Economics Section, Departement of Economics Princeton University,.
  37. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, Elsevier, vol. 53(1), pages 1-27, February.
  38. Edward M. Graham & Erika Wada, 2000. "Domestic Reform, Trade and Investment Liberalisation, Financial Crisis, and Foreign Direct Investment into Mexico," The World Economy, Wiley Blackwell, vol. 23(6), pages 777-797, 06.
  39. Tybout, James R. & Westbrook, M. Daniel, 1995. "Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries," Journal of International Economics, Elsevier, Elsevier, vol. 39(1-2), pages 53-78, August.
  40. Roy J. Ruffin, 1999. "The nature and significance of intra-industry trade," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Q IV, pages 2-9.
  41. William C. Gruben & Jahyeong Koo & Eric Millis, 2002. "How much does international trade affect business cycle synchronization ?," Working Papers, Federal Reserve Bank of Dallas 0203, Federal Reserve Bank of Dallas.
  42. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, Elsevier, vol. 11(4), pages 495-511, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Rodrigo Garcá-Verdú, 2005. "Factor Shares from Household Survey Data," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c010_057, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Robert A. Blecker, 2008. "External Shocks, Structural Change, and Economic Growth in Mexico 1979–2006," Working Papers, American University, Department of Economics 2008-04, American University, Department of Economics.
  3. Blecker, Robert A., 2009. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2007," World Development, Elsevier, Elsevier, vol. 37(7), pages 1274-1284, July.
  4. Sebastian Sosa, 2008. "External Shocks and Business Cycle Fluctuations in Mexico," IMF Working Papers 08/100, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bdm:wpaper:2004-05. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dirección de Sistemas).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.