The effects of crime on the Mexican economy: a vector error correction model

Diana Carreon-Guzman (diana.lcg@gmail.com), Jorge Garza-Rodriguez, David Garza-Turrubiates (david_turru@hotmail.com), Ricardo Gonzalez-Camargo (pino_gzz@hotmail.com) and Eugenio Lozano-Castillo (kenolozano88@hotmail.com)
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Diana Carreon-Guzman: Universidad de Monterrey
David Garza-Turrubiates: Universidad de Monterrey
Ricardo Gonzalez-Camargo: Universidad de Monterrey
Eugenio Lozano-Castillo: Universidad de Monterrey

Economics Bulletin, 2015, vol. 35, issue 2, 959-967

Abstract: The aim of this study was to examine the extent to which crime affects the components of aggregate demand and vice versa for the case of Mexico, using quarterly data for the number of homicides and the components of aggregate demand for the period from 1990 to 2010. We estimated a Vector Error Correction Model in order to be able to distinguish the short run and long run dynamics present between crime and aggregate demand and its components. In the short run, it was found that none of the components of aggregate demand affect crime and that the only component of aggregate demand affected by crime is private consumption, which is affected negatively by an increase in the crime rate. It was also found that crime has a positive effect on GDP, government consumption and imports in the long run. On the other hand, private consumption, investment and exports have a negative effect on crime in the long run. Thus, the results obtained in this study indicate the existence of a bidirectional relationship between crime and economic activity in Mexico.

Keywords: Crime; Economic Growth; Growth; Macroeconomics; Mexico (search for similar items in EconPapers)
JEL-codes: E2 K4 (search for similar items in EconPapers)
Date: 2015-04-09
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