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Trade, Productivity and Synchrony in Mexican and United States Manufacturing

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  • Daniel Garces Diaz

    (Bank of Mexico)

Abstract

This paper examines the factors behind the evolving synchrony between U.S. and Mexican industries, specially since 2001, when U.S. manufacturing production began to stagnate. A stylized model is developed to explain the origin and evolution of the correlations at the zero and cyclical frequencies. TFP shocks cannot account for the changes in the relationship since 2001. They arose from an increase in the use of capital and intermediate inputs in Mexican manufacturing. The long-run correlations are closely related to the contributions of the different sectors to U.S. manufacturing production growth. For example, the Mexican manufacturing production index has its highest correlation with the U.S. semiconductors sector although the production of such goods is almost inexistent in Mexico. This suggests that the correlations reflect the response of the Mexican sectors to U.S. aggregate shocks, a hypothesis verified within a VAR analysis.

Suggested Citation

  • Daniel Garces Diaz, 2018. "Trade, Productivity and Synchrony in Mexican and United States Manufacturing," 2018 Meeting Papers 41, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:41
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    File URL: https://economicdynamics.org/meetpapers/2018/paper_41.pdf
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    References listed on IDEAS

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    1. Andrew T. Foerster & Pierre-Daniel G. Sarte & Mark W. Watson, 2011. "Sectoral versus Aggregate Shocks: A Structural Factor Analysis of Industrial Production," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 1-38.
    2. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January.
    3. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    4. Thirlwall, Anthony P & Hussain, Mohammed Nureldin, 1982. "The Balance of Payments Constraint, Capital Flows and Growth Rate Differences between Developing Countries," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 498-510, November.
    5. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
    6. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January.
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