Effects of Supply, Demand, and Labor Market Shocks in the Mexican Manufacturing Sector

Colunga L. Fernando and Torre Cepeda Leonardo

No 2023-10, Working Papers from Banco de México

Abstract: This paper analyzes the contribution of supply and demand shocks, and labor market shocks, to the evolution of regional production and inflation of manufactured goods in Mexico within the context of the pandemic. Under the identification of a Bayesian Structural Vector Autoregressive (SBVAR) model with sign restrictions, it is found that since 2021, external demand shocks increased their contribution relative to local shocks in explaining the growth of manufactured goods production in all regions except the South; meanwhile, external supply shocks increased their positive contribution in explaining inflationary pressures across all regions. On the other hand, from 2022 onwards, labor supply shocks have contributed to the behavior of the production and inflation of manufactured goods in the Northern and North-Central regions.

Keywords: External shocks; Inflation; Manufacturing; SVAR (search for similar items in EconPapers)
JEL-codes: E31 F41 R11 (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-ure
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