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Trade Liberalisation in Mexico: Rhetoric and Reality

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  • Penelope Pacheco-López

    ()

  • A.P. Thirlwall

    ()

Abstract

This paper examines the process of trade liberalisation in Mexico, particularly since the mid-1980s and the signing of the NAFTA agreement, and its impact on economic performance. The average growth of GDP of the Mexican economy since liberalisation has been only one-half the rate pre-liberalisation and we attribute this deteriorating performance to a rise in the income elasticity of demand for imports (partly associated with an increase in foreign direct investment with a high import content) which has not been compensated by a sufficiently fast growth of exports, leading to severe balance of payments difficulties. Mexican exchange rate policy has not helped the situation.

Suggested Citation

  • Penelope Pacheco-López & A.P. Thirlwall, 2004. "Trade Liberalisation in Mexico: Rhetoric and Reality," Studies in Economics 0403, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:0403
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    References listed on IDEAS

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    1. J.-C. Moreno-Brid, 1998. "Balance-of-payments constrained economic growth: the case of Mexico," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 51(207), pages 413-433.
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    4. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    5. World Bank, 2002. "World Development Indicators 2002," World Bank Publications, The World Bank, number 13921.
    6. Robert A. Blecker, 1996. "NAFTA, the Peso Crisis, and the Contradictions of the Mexican Economic Growth Strategy," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 1996-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    7. Prebisch, Raúl, 1950. "The economic development of Latin America and its principal problems," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29973, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. Mortimore, Michael, 2000. "Corporate Strategies for FDI in the Context of Latin America's New Economic Model," World Development, Elsevier, pages 1611-1626.
    9. Anne O. Krueger, 2000. "NAFTA's Effects: A Preliminary Assessment," The World Economy, Wiley Blackwell, pages 761-775.
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    11. Juan Carlos Moreno-Brid, 1999. "Mexico's Economic Growth and the Balance of Payments Constraint: A cointegration analysis," International Review of Applied Economics, Taylor & Francis Journals, pages 149-159.
    12. Nora C. Lustig, 1997. "NAFTA: Setting the Record Straight," The World Economy, Wiley Blackwell, pages 605-614.
    13. Julio López G. & Alberto Cruz B., 2000. "“Thirlwall’s Law” and Beyond: The Latin American Experience," Journal of Post Keynesian Economics, Taylor & Francis Journals, pages 477-495.
    14. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, pages 1551-1580.
    15. David M. Gould, 1998. "Has NAFTA changed North American trade?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 12-23.
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    Cited by:

    1. Arnaud Chevalier & Colm Harmon & Vincent O’ Sullivan & Ian Walker, 2013. "The impact of parental income and education on the schooling of their children," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-22, December.
    2. Robert A. Blecker, 2006. "Macroeconomic and Structural Constraints on Export-Led Growth in Mexico," Working Papers 2006-05, American University, Department of Economics.
    3. Robert Blecker, 2007. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2006," Working Papers wp157, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Fugarolas Álvarez-Ude, Guadalupe & Matesanz Gómez, David, 2005. "Restricción de balanza de pagos y vulnerabilidad externa en la argentina de los noventa. Un análisis de caso," MPRA Paper 210, University Library of Munich, Germany, revised 2005.
    5. Penélope Pacheco-López, 2005. "Foreign Direct Investment, Exports and Imports in Mexico," The World Economy, Wiley Blackwell, pages 1157-1172.
    6. Blecker, Robert A., 2009. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2007," World Development, Elsevier, pages 1274-1284.
    7. Cruz, Moritz, 2008. "Can Free Trade Guarantee Gains from Trade?," WIDER Working Paper Series 097, World Institute for Development Economic Research (UNU-WIDER).
    8. Robert Blecker, 2007. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2006," Working Papers wp157, Political Economy Research Institute, University of Massachusetts at Amherst.
    9. Blecker, Robert A. & Ibarra, Carlos A., 2013. "Trade liberalization and the balance of payments constraint with intermediate imports: The case of Mexico revisited," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 33-47.
    10. Penelope Pacheco-Lopez & A.P. Thirlwall, 2005. "Trade Liberalisation, the Balance of Payments and Growth in Latin America," Studies in Economics 0506, School of Economics, University of Kent.
    11. Carlos A. Ibarra & Robert A. Blecker, 2016. "Structural change, the real exchange rate and the balance of payments in Mexico, 1960–2012," Cambridge Journal of Economics, Oxford University Press, pages 507-539.
    12. Escobar Gamboa, Octavio Romano, 2009. "IDE entrants, exportations et productivité manufacturière : les différentes performances des régions mexicaines," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/3850 edited by Guillochon, Bernard.
    13. Ali, Syed Zahid & Anwar, Sajid & Valadkhani, Abbas, 2012. "Macroeconomic consequences of increased productivity in less developed economies," Economic Modelling, Elsevier, pages 621-631.
    14. Beteta, Hugo E. & Moreno Brid, Juan Carlos, 2014. "Structural change and growth in Central America and the Dominican Republic: an overview of two decades, 1990-2011," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 122 edited by Eclac.
    15. Pennelope Pacheco-Lopez & Anthony P. Thirlwall, 2004. "Trade liberalisation in Mexico: rhetoric and reality," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 57(229), pages 141-167.
    16. repec:dau:papers:123456789/10604 is not listed on IDEAS

    More about this item

    Keywords

    trade liberalisation; economic growth; balance of payments; foreign direct investment; Mexico; NAFTA;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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