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Accounting for Output Fluctuations in Mexico

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  • Arturo Antón Sarabia

Abstract

During the last years, Mexico has registered relatively large output falls. The business cycle accounting method of Chari, Kehoe and McGrattan (2007) is applied to the two most recent recessions in Mexico (including the “Tequila crisis”) in order to understand what are the most important wedges driving output over the cycle and to evaluate to what extent such falls may be smoothed. First, it is found that efficiency and labor wedges may reasonably account for output fluctuations in each recession. Second, counterfactual exercises suggest that the elimination of distortions represented in terms of the efficiency wedge might result in output falls about one third of those observed in the data.

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File URL: http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/%7BC7EC31A4-53B6-E15E-0F8F-2818A789782B%7D.pdf
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Bibliographic Info

Paper provided by Banco de México in its series Working Papers with number 2008-05.

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Date of creation: May 2008
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Handle: RePEc:bdm:wpaper:2008-05

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Web page: http://www.banxico.org.mx
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Keywords: Business cycle accounting; Tequila crisis; Total factor productivity; Mexico;

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  1. Andres Erosa & Ana Hidalgo, 2007. "On Finance as a Theory of TFP, Cross-Industry Productivity Differences, and Economic Rents," Working Papers tecipa-285, University of Toronto, Department of Economics.
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