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Exports, imports, FDI and GDP in Mexico

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  • José Romero

    (El Colegio de Mexico)

Abstract

This paper studies the impact of trade liberalization on economic growth for Mexico. A four-variable vector autoregression (VAR) is used to study the relationships between trade, FDI and economic growth using quarterly data from 1989 to 2013. The estimated results from the Granger causality/Block exogeneity test show that economic growth is affected by real non-oil exports, real imports and real foreign direct investment. There is only one bidirectional causality, that between GDP an FDI, and two additional one-way causalities, one between FDI and imports and one between imports and non-oil exports. Thus the system is circular: all variables directly or indirectly affect each other. The Impulse Response Functions and Variance Decomposition show that non-oil exports and FDI have little or no impact on GDP, not supporting the growth-led hypothesis or the one that postulates that FDI promotes growth; nor do we find that GDP has a significant effect on non-oil exports, rejecting the hypothesis that growth induces exports. Finally we find that imports have a significant effect on GDP, supporting the import-compression hypothesis.

Suggested Citation

  • José Romero, 2015. "Exports, imports, FDI and GDP in Mexico," Serie documentos de trabajo del Centro de Estudios Económicos 2015-01, El Colegio de México, Centro de Estudios Económicos.
    • Handle: RePEc:emx:ceedoc:2015-01
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    File URL: https://cee.colmex.mx/dts/2015/DT-2015-1.pdf
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    References listed on IDEAS

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    Keywords

    trade liberalization; economic growth; Mexico; FDI; GDP;
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