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Accounting for Output Fluctuations in Mexico

  • Arturo Antón Sarabia

During the last years, Mexico has registered relatively large output falls. The business cycle accounting method of Chari, Kehoe and McGrattan (2007) is applied to the two most recent recessions in Mexico (including the “Tequila crisis”) in order to understand what are the most important wedges driving output over the cycle and to evaluate to what extent such falls may be smoothed. First, it is found that efficiency and labor wedges may reasonably account for output fluctuations in each recession. Second, counterfactual exercises suggest that the elimination of distortions represented in terms of the efficiency wedge might result in output falls about one third of those observed in the data.

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File URL: http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/%7BC7EC31A4-53B6-E15E-0F8F-2818A789782B%7D.pdf
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Paper provided by Banco de México in its series Working Papers with number 2008-05.

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Date of creation: May 2008
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Handle: RePEc:bdm:wpaper:2008-05
Contact details of provider: Web page: http://www.banxico.org.mx

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  1. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006. "Appendices: Business cycle accounting," Staff Report 362, Federal Reserve Bank of Minneapolis.
  2. Andres Erosa & Ana Hidalgo, 2007. "On Finance as a Theory of TFP, Cross-Industry Productivity Differences, and Economic Rents," Working Papers tecipa-285, University of Toronto, Department of Economics.
  3. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1, June.
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  7. Lawrence J. Christiano & Joshua M. Davis, 2006. "Two Flaws In Business Cycle Accounting," NBER Working Papers 12647, National Bureau of Economic Research, Inc.
  8. Timothy J. Kehoe & Edward C. Prescott(), 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
  9. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006. "Comparing alternative representations and alternative methodologies in business cycle accounting," Working Papers 647, Federal Reserve Bank of Minneapolis.
  10. Felipe Meza & Erwan Quintin, 2005. "Financial crises and total factor productivity," Center for Latin America Working Papers 0105, Federal Reserve Bank of Dallas.
  11. V. V. Chari & Patrick Kehoe & Ellen McGrattan, 2004. "Business Cycle Accounting," Levine's Bibliography 122247000000000560, UCLA Department of Economics.
  12. Pablo A. Neumeyer & Fabrizio Perri, 2004. "Business Cycles in Emerging Economies: The Role of Interest Rates," NBER Working Papers 10387, National Bureau of Economic Research, Inc.
  13. Mark Gertler & Simon Gilchrist & Fabio M. Natalucci, 2001. "External constraints on monetary policy and the financial accelerator," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  14. Ricardo Lagos, 2006. "A Model of TFP," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 983-1007.
  15. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
  16. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  17. Duffy, John & Xiao, Wei, 2007. "Instability of sunspot equilibria in real business cycle models under adaptive learning," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 879-903, April.
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