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Synchronization of Economic Activity between Mexico and the US: What are the causes?

  • Ramón A. Catillo Ponce


    (California State University, Los Angeles, Department of Economics and Statistics, and Universidad Autónoma de Baja California, Facultad de Economía y Relaciones Internacionales. 5151 State University Drive, Los Angeles, CA 90032 USA)

  • Rogelio Varela Llamas


    (Facultad de Economía y Relaciones Internacionales. Calzada Universidad No. 14418 Mesa de Otay, Tijuana Baja California, México.)

  • Juan M. Ocegueda


    (Facultad de Economía y Relaciones Internacionales. Calzada Universidad No. 14418 Mesa de Otay, Tijuana Baja California, México.)

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    Using data on manufacturing production for the entire industry and 8 of its 9 divisions, we find little evidence of synchronization between manufacturing output in Mexico and the US. Hence, it is unlikely that the synchronization of the business cycles of these two countries emerged as the result of the synchronization of economic activity in the manufacturing industry, as previous studies have suggested. Given these results, we propose two alternatives for explaining business cycles synchronization: the dynamics of the gross domestic product of the service sector and aggregate consumption. We show that both Mexican variables share common trends and common cycles with their US counterparts. We recommend further research to evaluate how these aggregates have contributed to the synchronization of the business cycles in Mexico and the US.

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    Article provided by Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines in its journal Revista de Analisis Economico.

    Volume (Year): 25 (2010)
    Issue (Month): 1 (June)
    Pages: 15-48

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    Handle: RePEc:ila:anaeco:v:25:y:2010:i:1:p:15-48
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