Are export and capital accumulation panacea for economic growth in Mexico?: a non-linearity evidence

The persistent variances in the Mexico’s economic trajectory raises concerns on the need for effect and alternative growth channels. To this end, the present study seeks to explore whether export expansion and capital accumulation serves as growth catalysts while controlling for other indices. The present study draws motivation from the United Nations Sustainable Development Goals (UNSDS-8) that highlighted the need for decent work and sustainable economic growth. To this end, asymmetric non-linear econometric framework such as Autoregressive distributed lag (ARDL) methodology advanced by Shin et al. (Sickles and Horrace (eds), Festschrift in Honor of Peter Schmidt, Springer, New York, 2014) is applied to arrive at an evidence-based conclusion. According to the linear and the nonlinear ARDL bounds test for cointegration there exists evidence for asymmetric relationship between the outlined variables. Furthermore, the present study finds support for the validation for the export-led growth hypothesis for Mexico in both short and long run and irrespective of the positive and negative shock imposed. Additionally, the Solow-Swan indictor of capital and economic growth in an asymmetric setting contributes to economic growth in an export-oriented economy like Mexico. However, energy consumption only has a positive effect on economic growth in the short run and is not statistically sufficient for long run economic growth. These empirical results have policy caveats for Mexico economy for the desired sustainable economic growth. From a policy lens to advance sustainable economic growth there is need for policymakers to encourage prioritize growth catalyst like increase capital stock accumulation, labour, and energy as they hold growth potential for increased sustainable economic growth while reduced emphasis on over dependence on traditional growth indicators. More insights on policy directions are appended in concluding section.