An Analysis of the Process of Disinflationary Structural Change: The Case of Mexico

Vaughan Daniel

No 2013-12, Working Papers from Banco de México

Abstract: I study the diffusion process of permanent disinflationary shocks in the Mexican economy using disaggregated price data for 283 goods across 46 cities in the period 1995-2012. I first show that the distribution of shocks shows considerable heterogeneity, with more than 80% of all cases having experienced a break. I then show that both the likelihood and timing are spatially correlated across cities, and find a positive and concave relationship between CPI weights and the likelihood and timing of a break. These findings suggest that the process of structural change follows a diffusion process across the spatial and goods dimensions.

JEL-codes: C21 C22 C24 E30 E31 N16 N26 O54 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-mac
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