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External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2006

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Author Info
Robert Blecker
Abstract

This paper estimates the effects of external constraints on growth and investment in the Mexican economy, and how those effects have changed since the economic liberalization of the 1980s and the formation of NAFTA in 1994. Shocks to net financial inflows, world oil prices, the U.S. growth rate, and the real value of the peso explain most of the fluctuations in Mexico’s annual growth since 1979 (with structural breaks in some of these effects due to liberalization or NAFTA). Both Hausman weak exogeneity tests and simultaneous equations estimates generally support the view that growth drives investment but not the other way around, in the short run. Inflows of foreign direct investment have positive effects on investment, but the coefficients are small and their statistical significance is marginal.

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Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp157.

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Date of creation: 2007
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Handle: RePEc:uma:periwp:wp157

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Related research
Keywords: Mexican economy; external shocks; economic growth; investment function; financial inflows; real exchange rates;

Find related papers by JEL classification:
O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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  1. Penelope Pacheco-López & A.P. Thirlwall, 2004. "Trade Liberalisation in Mexico: Rhetoric and Reality," Studies in Economics 0403, Department of Economics, University of Kent. [Downloadable!]
  2. Julio López Gallardo & Juan Carlos Moreno-Brid & Martín Puchet Anyul, 2006. "Financial Fragility And Financial Crisis In Mexico," Metroeconomica, Blackwell Publishing, vol. 57(3), pages 365-388, 07. [Downloadable!] (restricted)
  3. Luis Miguel Galindo & Jaime Ros, 2008. "Alternatives to inflation targeting in Mexico," International Review of Applied Economics, Taylor and Francis Journals, vol. 22(2), pages 201-214. [Downloadable!] (restricted)
  4. Robert S. Chirinko, 1993. "Business fixed investment spending: a critical survey of modeling strategies, empirical results, and policy implications," Research Working Paper 93-01, Federal Reserve Bank of Kansas City.
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  5. Alicia Puyana, 2006. "Mexican Oil Policy and Energy Security Within NAFTA," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 35(2), pages 72-97, June. [Downloadable!] (restricted)
  6. Ebrima Faal, 2005. "GDP Growth, Potential Output, and Output Gaps in Mexico," IMF Working Papers 05/93, International Monetary Fund. [Downloadable!]
  7. Chirinko, Robert S. & Fazzari, Steven M. & Meyer, Andrew P., 1999. "How responsive is business capital formation to its user cost?: An exploration with micro data," Journal of Public Economics, Elsevier, vol. 74(1), pages 53-80, October. [Downloadable!] (restricted)
  8. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994-1), pages 253-316. [Downloadable!]
  9. Rudger Dornbusch & Ilan Goldfajn & Rodrigo O. Valdés, 1995. "Currency Crises and Collapses," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-2), pages 219-294. [Downloadable!]
  10. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178. [Downloadable!] (restricted)
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