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The dynamic effects of aggregate supply and demand shocks in the Mexican economy

Ivan Mendieta-Muñoz ()
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Ivan Mendieta-Muñoz: Department of Economics, University of Utah

Authors registered in the RePEc Author Service: Ivan Mendieta-Muñoz

Economics Bulletin, 2018, vol. 38, issue 1, 41-51

Abstract: This paper studies if the supply shock derived from the Blanchard-Quah methodology contains a demand driven component in the Mexican economy during the period 1981Q1-2016Q2. We find that supply shocks are not contemporaneously correlated with demand shocks, so that 1) the anomaly in the inflation dynamics to a supply shock is not present if the standard Blanchard-Quah restrictions are employed; and 2) supply (demand) shocks represent the primary source of the long-run variation in output (inflation). The results show that it is possible to identify uncorrelated supply and demand shocks for the Mexican economy using the standard restrictions imposed by the Blanchard-Quah approach.

Keywords: Structural VAR; supply shocks; demand shocks; Blanchard-Quah decomposition; Mexican economy. (search for similar items in EconPapers)
JEL-codes: E3 O1 (search for similar items in EconPapers)
Date: 2018-01-21
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