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The Mexican intertemporal budget constraint: Persistent signals of an eventual collapse

  • Núñez, José A.
  • Urzúa, Carlos M.

This paper examines the sustainability of the Mexican current account deficit prior to the December 1994 crisis. It tests whether or not the Mexican economy was satisfying its intertemporal budget constraint, and finds that signals of possible trouble without a change in policies were present long before the crisis. The tests used are based on the Wickens-Uctum criterion for the sustainability of current account deficits, extended to include the case of possible interventions.

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File URL: http://alejandria.ccm.itesm.mx/egap/documentos/EGAP-2003-03.pdf
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Paper provided by Tecnológico de Monterrey, Campus Ciudad de México in its series EGAP Working Papers with number 200303.

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Date of creation: Oct 1995
Date of revision:
Publication status: Published in Estudios Económicos, 1996, vol. 11, pp. 167-180.
Handle: RePEc:ega:docume:200303
Contact details of provider: Web page: http://www.ccm.itesm.mx/egap/

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  1. Charles Engel & Craig S. Hakkio, 1994. "The distribution of exchange rates in the EMS," Research Working Paper 94-03, Federal Reserve Bank of Kansas City.
  2. Trehan, Bharat & Walsh, Carl E., 1988. "Common trends, the government's budget constraint, and revenue smoothing," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 425-444.
  3. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  4. Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, vol. 41(3-4), pages 235-264, November.
  5. Wickens, M. R. & Uctum, Merih, 1993. "The sustainability of current account deficits : A test of the US intertemporal budget constraint," Journal of Economic Dynamics and Control, Elsevier, vol. 17(3), pages 423-441, May.
  6. Christiano, Lawrence J, 1992. "Searching for a Break in GNP," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 237-50, July.
  7. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 253-316.
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