Business cycles in Mexico and the United States: Do they share common movements?

Jorge Herrera Hernández
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Jorge Herrera Hernández: Banco de México - Economic Research Department, http://www.banxico.org.mx

Journal of Applied Economics, 2004, vol. VII, pages 303-323

Abstract: In this document I apply a recently developed econometric technique to prove the existence of common movements between time series. Said methodology is used to test and measure the existence of common cycles between the economies of Mexico and the United States for the 1993-2001 period. It is found that both economies share a common trend and a common cycle. Also, given the existence of one common cycle between these economies, it is found that transitory shocks affecting Mexico’s GDP are more important than when a conventional trend-cycle decomposition methodology is applied. Finally, it is shown that there are efficiency gains in forecasting by considering the common cycle restriction in a bivariate vector error correction model that includes the Mexican and the U.S. GDPs.

Keywords: time series models; U.S. GDP; Mexican GDP (search for similar items in EconPapers)
JEL-codes: C32 O51 O54 (search for similar items in EconPapers)
Date: 2004
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