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How Has Nafta Affected the Mexican Economy? Review and Evidence

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Author Info

  • M. Ayhan Kose
  • Christopher M. Towe
  • Guy Meredith

Abstract

This paper provides a comprehensive assessment of the impact of NAFTA on growth and business cycles in Mexico. The effect of the agreement in spurring a dramatic increase in trade and financial flows between Mexico and its NAFTA partners, and its impact on Mexican economic growth and business cycle dynamics, are documented with reference both to stylized facts and recent empirical research. The paper concludes by drawing lessons from Mexico''s NAFTA experience for policymakers in developing countries. The foremost of these is that in an increasingly globalized trading system, bilateral and regional free trade arrangements should be used to accelerate, rather than postpone, needed structural reform.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/59.

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Length: 49
Date of creation: 01 Apr 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/59

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Keywords: Trade; Economic growth; business cycles; free trade; business cycle; trade flows; trade agreements; international trade; increased trade; industry trade; gdp growth; world economy; free trade agreement; trade agreement; trade diversion; economic integration; growth rate; trade area; output volatility; investment flows; free trade area; regional trade; trade openness; partner countries; trade barriers; free trade agreements; total factor productivity; vertical specialization; trade liberalization; tariff rate; regional trade agreements; real gdp; trade negotiations; global trade; trade intensity; intermediate inputs; dispute settlement; intellectual property; average tariff rate; average tariff; intermediate goods; output growth; trade integration; changes in trade; trade arrangements; nontariff barriers; impact of trade; bilateral trade; free trade arrangements; regional integration; growth rates; competitive pressures; multilateral trade; trade volume; rules of origin; trading partners; pre-nafta; multilateral trade negotiations; export sector; free trade areas; external shocks; dispute settlement process; tariff rates; competition policy; preferential trade agreements; border trade; business cycle dynamics; world trade; world exports; intellectual property rights; trade areas; merchandise trade; liberalized trade; fixed capital formation; foreign trade; mfn tariffs; import demand; average tariffs; oil revenues; export share; preferential trade; equilibrium model; preferential treatment; business cycle fluctuations; capital formation; tariff increases; bilateral trade agreements; domestic savings; bilateral agreements; trade blocs; agreement on trade; trade growth; exchange rate regimes; market liberalization; safeguard actions; dispute settlement mechanism; terms of trade; domestic economy; domestic prices; current account deficit; member country; external financing; net exports; economic convergence; international trade agreements; business cycle synchronization; open economy; political economy; trading partner; elasticity of substitution; trade regime; dynamic effects; transport costs; dispute resolution; illegal immigration; preliminary assessment; bilateral trade relations; bilateral free trade agreements; trading system; investor confidence; transmission of shocks; bilateral free trade; volume of trade; gross fixed capital formation; idiosyncratic factors; business cycle correlation; trade regimes; unilateral reduction; trade performance; trade relations; preferential tariff; global integration; patterns of trade; business cycle volatility; protection of intellectual property rights; multinational companies; world trade organization; governing investment; open economies; trade liberalizations; trade creation; economic interdependence; gross domestic product; investment goods;

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References

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Cited by:
  1. Florian Mölders & Ulrich Volz, 2011. "Trade creation and the status of FTAs: empirical evidence from East Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(3), pages 429-456, September.
  2. Ayhan Kose & Marco E. Terrones & Eswar Prasad, 2004. "How do trade and financial integration affect the relationship between growth and volatility?," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  3. Mathan Satchi & Jonathan Temple, 2008. "Labour Markets and Productivity in Developing Countries," Studies in Economics 0805, Department of Economics, University of Kent.
  4. Mathan Satchi & Jonathan Temple, 2008. "Online Appendix for "Labor Markets and Productivity in Developing Countries"," Technical Appendices 06-167, Review of Economic Dynamics.
  5. Ebrima Faal, 2005. "Gdp Growth, Potential Output, and Output Gaps in Mexico," IMF Working Papers 05/93, International Monetary Fund.
  6. Mathan Satchi & Jonathan Temple, 2006. "Growth and labour markets in developing countries," CEDI Discussion Paper Series 06-12, Centre for Economic Development and Institutions(CEDI), Brunel University.
  7. Sebastian Sosa, 2008. "External Shocks and Business Cycle Fluctuations in Mexico," IMF Working Papers 08/100, International Monetary Fund.
  8. Julia Kubny & Florian Mölders & Peter Nunnenkamp, 2008. "Regional Integration and FDI in Emerging Markets," Kiel Working Papers 1418, Kiel Institute for the World Economy.
  9. Francisco Callado-Muñoz & Jana Hromcová & Natalia Utrero-González, 2014. "Openness and Technology Diffusion in Payment Systems: The Case of NAFTA," Computational Economics, Society for Computational Economics, vol. 43(4), pages 497-519, April.
  10. Altug, Sumru & Tan, Barış & Gencer, Gözde, 2012. "Cyclical dynamics of industrial production and employment: Markov chain-based estimates and tests," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1534-1550.
  11. Nagesh Kumar, 2007. "Investment Provisions in Regional Trading Arrangements in Asia : Relevance, Emerging Trends, and Policy Implications," Trade Working Papers 22109, East Asian Bureau of Economic Research.
  12. Abdul Abiad & Petya Koeva Brooks & Irina Tytell & Daniel Leigh & Ravi Balakrishnan, 2009. "What’S the Damage? Medium-Term Output Dynamics After Banking Crises," IMF Working Papers 09/245, International Monetary Fund.
  13. Nagesh Kumar, 2007. "Regional Economic Integration, Foreign Direct Investment and Efficiency-Seeking Industrial Restructuring in Asia : The Case of India," Macroeconomics Working Papers 22110, East Asian Bureau of Economic Research.
  14. Jordaan, Jacob A., 2008. "Intra- and Inter-industry Externalities from Foreign Direct Investment in the Mexican Manufacturing Sector: New Evidence from Mexican Regions," World Development, Elsevier, vol. 36(12), pages 2838-2854, December.

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