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Trade Liberalisation in Mexico: Rhetoric and Reality

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  • Penelope Pacheco-López

    ()

  • A.P. Thirlwall

    ()

Abstract

This paper examines the process of trade liberalisation in Mexico, particularly since the mid-1980s and the signing of the NAFTA agreement, and its impact on economic performance. The average growth of GDP of the Mexican economy since liberalisation has been only one-half the rate pre-liberalisation and we attribute this deteriorating performance to a rise in the income elasticity of demand for imports (partly associated with an increase in foreign direct investment with a high import content) which has not been compensated by a sufficiently fast growth of exports, leading to severe balance of payments difficulties. Mexican exchange rate policy has not helped the situation.

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File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/0403.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 0403.

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Date of creation: Jan 2004
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Handle: RePEc:ukc:ukcedp:0403

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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/

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Keywords: trade liberalisation; economic growth; balance of payments; foreign direct investment; Mexico; NAFTA;

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References

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  1. David M. Gould, 1998. "Has NAFTA changed North American trade?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 12-23.
  2. Nora C. Lustig, 1997. "NAFTA: Setting the Record Straight," The World Economy, Wiley Blackwell, vol. 20(5), pages 605-614, 08.
  3. Juan Carlos Moreno-Brid, 1999. "Mexico's Economic Growth and the Balance of Payments Constraint: A cointegration analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(2), pages 149-159.
  4. Anthony Philip Thirlwall, 1979. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
  5. Julio López G. & Alberto Cruz B., 2000. ""Thirlwall's Law" and beyond: The Latin American Experience," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 22(3), pages 477-495, April.
  6. Anne O. Krueger, 2000. "NAFTA's Effects: A Preliminary Assessment," The World Economy, Wiley Blackwell, vol. 23(6), pages 761-775, 06.
  7. Ten Kate, Adriaan, 1992. "Trade liberalization and economic stabilization in Mexico: Lessons of experience," World Development, Elsevier, vol. 20(5), pages 659-672, May.
  8. Robert A. Blecker, 1996. "NAFTA, the Peso Crisis, and the Contradictions of the Mexican Economic Growth Strategy," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 1996-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  9. Mario Cimoli & Nelson Correa, 2002. "Trade Openess and Technological Gaps in Latin America: a Low Growth Trap," LEM Papers Series 2002/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  10. World Bank, 2002. "World Development Indicators 2002," World Bank Publications, The World Bank, number 13921, October.
  11. Mortimore, Michael, 2000. "Corporate Strategies for FDI in the Context of Latin America's New Economic Model," World Development, Elsevier, vol. 28(9), pages 1611-1626, September.
  12. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
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Citations

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Cited by:
  1. Cruz, Moritz, 2008. "Can Free Trade Guarantee Gains from Trade?," Working Paper Series RP2008/97, World Institute for Development Economic Research (UNU-WIDER).
  2. Fugarolas Álvarez-Ude, Guadalupe & Matesanz Gómez, David, 2005. "Restricción de balanza de pagos y vulnerabilidad externa en la argentina de los noventa. Un análisis de caso," MPRA Paper 210, University Library of Munich, Germany, revised 2005.
  3. Robert A. Blecker, 2006. "Macroeconomic and Structural Constraints on Export-Led Growth in Mexico," Working Papers 2006-05, American University, Department of Economics.
  4. Penélope Pacheco-López, 2005. "Foreign Direct Investment, Exports and Imports in Mexico," The World Economy, Wiley Blackwell, vol. 28(8), pages 1157-1172, 08.
  5. Robert Blecker, 2007. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2006," Working Papers wp157, Political Economy Research Institute, University of Massachusetts at Amherst.
  6. Blecker, Robert A. & Ibarra, Carlos A., 2013. "Trade liberalization and the balance of payments constraint with intermediate imports: The case of Mexico revisited," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 33-47.
  7. Penelope Pacheco-Lopez & A.P. Thirlwall, 2005. "Trade Liberalisation, the Balance of Payments and Growth in Latin America," Studies in Economics 0506, Department of Economics, University of Kent.
  8. Ali, Syed Zahid & Anwar, Sajid & Valadkhani, Abbas, 2012. "Macroeconomic consequences of increased productivity in less developed economies," Economic Modelling, Elsevier, vol. 29(3), pages 621-631.
  9. Blecker, Robert A., 2009. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2007," World Development, Elsevier, vol. 37(7), pages 1274-1284, July.

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