External Shocks and Business Cycle Fluctuations in Mexico: How Important are U.S. Factors?

April 1, 2008

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Sebastian Sosa. External Shocks and Business Cycle Fluctuations in Mexico: How Important are U.S. Factors?, (USA: International Monetary Fund, 2008) accessed December 27, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the relative importance of external shocks as sources of business cycle fluctuations in Mexico, and identifies the dynamic responses of domestic output to foreign disturbances. Using a VAR model with block exogeneity restrictions, it finds that U.S. shocks explain a large share of Mexico's macroeconomic fluctuations after NAFTA. This partly reflects greater trade integration-but also Mexico's "Great Moderation," as the country escaped its former pattern of macro-financial crises. In this period, Mexico's output fluctuations have been closely synchronized with the U.S. cycle, with a large and rapid impact of U.S. shocks on Mexican growth.

Subject: Business cycles, Exports, Imports, Industrial production, Oil prices

Keywords: Export, Gdp, Mexico, Output, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/100
Stock No:

WPIEA2008100
ISBN:

9781451869613
ISSN:

1018-5941

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