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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. 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)
  2. 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)
  3. 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)
  4. Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, vol. 41(3-4), pages 235-264, November. [Downloadable!] (restricted)
  5. Juan Carlos Moreno-Brid, 1999. "Mexico's Economic Growth and the Balance of Payments Constraint: a cointegration analysis," International Review of Applied Economics, Taylor and Francis Journals, vol. 13(2), pages 149-159, May. [Downloadable!] (restricted)
  6. De Leon, Ernesto Zedillo Ponce, 1986. "Mexico's recent balance-of-payments experience and prospects for growth," World Development, Elsevier, vol. 14(8), pages 963-991, August. [Downloadable!] (restricted)
  7. 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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