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Trade, Productivity and Synchrony in Mexican and United States Manufacturing

Author

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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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    References listed on IDEAS

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