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Effects of Supply, Demand, and Labor Market Shocks in the Mexican Manufacturing Sector

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  • Colunga L. Fernando
  • Torre Cepeda Leonardo

Abstract

This paper analyzes the contribution of supply and demand shocks, and labor market shocks, to the evolution of regional production and inflation of manufactured goods in Mexico within the context of the pandemic. Under the identification of a Bayesian Structural Vector Autoregressive (SBVAR) model with sign restrictions, it is found that since 2021, external demand shocks increased their contribution relative to local shocks in explaining the growth of manufactured goods production in all regions except the South; meanwhile, external supply shocks increased their positive contribution in explaining inflationary pressures across all regions. On the other hand, from 2022 onwards, labor supply shocks have contributed to the behavior of the production and inflation of manufactured goods in the Northern and North-Central regions.

Suggested Citation

  • Colunga L. Fernando & Torre Cepeda Leonardo, 2023. "Effects of Supply, Demand, and Labor Market Shocks in the Mexican Manufacturing Sector," Working Papers 2023-10, Banco de México.
    • Handle: RePEc:bdm:wpaper:2023-10
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    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7BB062314B-476D-ED64-D38C-D1802C15EE01%7D.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    External shocks; Inflation; Manufacturing; SVAR;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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