External Shocks and Business Cycle Fluctuations in Mexico: How Important are U.S. Factors?
AbstractThis paper examines the relative importance of external shocks as sources of business cycle fluctuations in Mexico, and identifies the dynamic responses of domestic output to foreign disturbances. Using a VAR model with block exogeneity restrictions, it finds that U.S. shocks explain a large share of Mexico's macroeconomic fluctuations after NAFTA. This partly reflects greater trade integration-but also Mexico's "Great Moderation," as the country escaped its former pattern of macro-financial crises. In this period, Mexico's output fluctuations have been closely synchronized with the U.S. cycle, with a large and rapid impact of U.S. shocks on Mexican growth.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 08/100.
Date of creation: 01 Apr 2008
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-MAC-2008-06-21 (Macroeconomics)
- NEP-OPM-2008-06-21 (Open Economy Macroeconomic)
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