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Accounting for Output Fluctuations in Mexico

Listed author(s):
  • 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
Handle: RePEc:bdm:wpaper:2008-05
Contact details of provider: Web page: http://www.banxico.org.mx

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  1. Andrés Erosa & Ana Hidalgo Cabrillana, 2008. "On Finance As A Theory Of Tfp, Cross-Industry Productivity Differences, And Economic Rents," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 437-473, 05.
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  3. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006. "Appendices: Business cycle accounting," Staff Report 362, Federal Reserve Bank of Minneapolis.
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  7. 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.
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  17. 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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