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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. Roger E.A. Farmer & Jang Ting Guo, 1992. "Real Business Cycles and the Animal Spirits Hypothesis," UCLA Economics Working Papers 680, UCLA Department of Economics.
  2. 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.
  3. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Business cycle accounting," Working Papers 625, Federal Reserve Bank of Minneapolis.
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  8. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
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  11. James Heckman & Carmen Pages, 2003. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Working Papers 10129, National Bureau of Economic Research, Inc.
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  13. Lawrence J. Christiano & Joshua M. Davis, 2006. "Two flaws in business cycle accounting," Working Paper Series WP-06-10, Federal Reserve Bank of Chicago.
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  15. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
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  18. Timothy Kehoe & Edward Prescott, 2002. "Data Appendix to Great Depressions of the Twentieth Century," Technical Appendices kehoe02, Review of Economic Dynamics.
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