Productivity, Inflation, And Investment: An Analysis Of Causality
This paper elaborates a Vector Error Correction (VEC) in order to determine the causality between inflation and productivity, and between the productivity and investment in Mexico. A VEC allows a causality analysis among cointegrated variables with the same integration order [Hall and Milne, 1994]. This work incorporates the test of constancy in the cointegration rank developed by Quintos (1997). The results show a consistent and bidirectional causality between inflation and productivity. Furthermore, these results denote that some investment components (mainly machinery and equipment imports, and construction) have a strong link with productivity.
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- Yash P. Mehra, 1993. "Unit labor costs and the price level," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 35-52.
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- Xiaming Liu & Haiyan Song & Peter Romilly, 1997. "An empirical investigation of the causal relationship between openness and economic growth in China," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1679-1686.
- Xiaohui Liu & Peter Burridge & P. J. N. Sinclair, 2002. "Relationships between economic growth, foreign direct investment and trade: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 34(11), pages 1433-1440.
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