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Gdp Growth, Potential Output, and Output Gaps in Mexico

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  • Ebrima Faal

Abstract

This paper analyzes the sources of Mexico''s economic growth since the 1960s and compares various decompositions of historical growth into its trend and cyclical components. The role of the implied output gaps in the inflationary process is then assessed. Looking ahead, the paper presents medium-term paths for GDP based on alternative assumptions for productivity growth rates. The results indicate that the most important factor underlying the slowdown in output growth was a decline in trend total factor productivity growth. Economic policy reforms and the introduction of NAFTA may have raised trend productivity growth in recent years. Further increases in productivity growth would appear necessary, however, to raise medium-term growth.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/93.

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Length: 30
Date of creation: 01 May 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/93

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Keywords: Economic growth; Production; Economic models; gdp growth; equation; real gdp; growth rates; total factor productivity; growth accounting; correlation; gdp per capita; growth rate; covariance; time series; equations; standard error; business cycle; econometrics; statistic; standard deviation; rate of change; random walk; probability; forecasting; statistics; private consumption; prediction; capital formation; maximum likelihood estimation; random walks; estimation period; autocorrelation; survey; mean square; standard deviations; business cycles; sample size;

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  1. Gerlach, Stefan & Smets, Frank, 1999. "Output gaps and monetary policy in the EMU area1," European Economic Review, Elsevier, Elsevier, vol. 43(4-6), pages 801-812, April.
  2. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 357-84, March.
  3. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262112388, December.
  4. Easterly, William & Loayza, Norman & Montiel, Peter, 1997. "Has Latin America's post-reform growth been disappointing?," Journal of International Economics, Elsevier, Elsevier, vol. 43(3-4), pages 287-311, November.
  5. Ross Levine & María Carkovic, 2002. "Finance and Growth: New Evidence and Policy Analyses for Chile," Working Papers Central Bank of Chile, Central Bank of Chile 157, Central Bank of Chile.
  6. Chang-Jin Kim & Christian J. Murray, 2002. "Permanent and transitory components of recessions," Empirical Economics, Springer, Springer, vol. 27(2), pages 163-183.
  7. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 12(3), pages 361-68, July.
  8. Eduardo Lora, 1997. "A Decade of Structural Reform in Latin America: What Has Been Reformed and How to Measure It," Research Department Publications, Inter-American Development Bank, Research Department 4074, Inter-American Development Bank, Research Department.
  9. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  10. Eduardo Lora, 2001. "Structural Reforms in Latin America: What Has Been Reformed and How to Measure It," Research Department Publications, Inter-American Development Bank, Research Department 4293, Inter-American Development Bank, Research Department.
  11. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, Elsevier, vol. 18(1), pages 49-75, July.
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  13. Morley, James C., 2002. "A state-space approach to calculating the Beveridge-Nelson decomposition," Economics Letters, Elsevier, Elsevier, vol. 75(1), pages 123-127, March.
  14. Loayza, Norman & Palacios, Luisa, 1997. "Economic reform and progress in Latin America and the Caribbean," Policy Research Working Paper Series 1829, The World Bank.
  15. M. Ayhan Kose & Christopher M. Towe & Guy Meredith, 2004. "How Has Nafta Affected the Mexican Economy? Review and Evidence," IMF Working Papers, International Monetary Fund 04/59, International Monetary Fund.
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Cited by:
  1. Héctor Salgado Banda & Lorenzo E. Bernal Verdugo, 2007. "Multifactor Productivity and its Determinants: Al Empirical Analysis for Mexican Manufacturing," Working Papers, Banco de México 2007-09, Banco de México.
  2. Robert Blecker, 2007. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2006," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp157, Political Economy Research Institute, University of Massachusetts at Amherst.
  3. Freije, Samuel & Lopez-Acevedo, Gladys & Rodriguez-Oreggia, Eduardo, 2011. "Effects of the 2008-09 economic crisis on labor markets in Mexico," Policy Research Working Paper Series 5840, The World Bank.
  4. Julia Bersch & Tara M. Sinclair, 2011. "Mongolia," IMF Working Papers, International Monetary Fund 11/79, International Monetary Fund.
  5. Risso, W. Adrián & Punzo, Lionello F. & Carrera, Edgar J. Sánchez, 2013. "Economic growth and income distribution in Mexico: A cointegration exercise," Economic Modelling, Elsevier, Elsevier, vol. 35(C), pages 708-714.
  6. Tara Sinclair & Julia Bersch, 2013. "Statistical Versus Economic Output Gap Measures: Evidence from Mongolia," Working Papers, The George Washington University, Institute for International Economic Policy 2013-7, The George Washington University, Institute for International Economic Policy.
  7. Carlos Guerrero de Lizardi, 2009. "Contribution of the Information and Communication Technology sector to Mexican economic growth from 1999 to 2004," EconoQuantum, Revista de Economia y Negocios, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 6(1), pages 11-30, Julio - D.

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