Endogenous growth in Mexico: The role of US economic activity and balance of payments transfers

Alejandro Rodriguez Arana
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Alejandro Rodriguez Arana: Universidad Iberoamericana

EconoQuantum, Revista de Economia y Finanzas, 2007, vol. 3, issue 2, 7-32

Abstract: This paper calibrates an AK model of growth for Mexico. Investment financing is modeled considering the domestic savings ratio as well as net factorial income and capital inflows of the balance of payments. According to this model, actual parameters determining growth in Mexico are compatible with a long run rate of growth of about 3.6%. Under these circumstances, the ratio of the Mexican GDP to US GDP grows in time. Sustained growth depends heavily upon balance of payments transfers, which nowadays are conformed mainly by family remittances and the US economic growth, variables that nobody in Mexico can control. This fact implies that the domestic savings rate is very low. The paper concludes that to assure a positive growth that improves standards of living and the relative size of Mexico with respect to the US, policies to increase the domestic savings rate and productivity are necessary.

Keywords: Growth; remittances; savings. (search for similar items in EconPapers)
JEL-codes: O41 O47 O57 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:qua:journl:v:3:y:2007:i:2:p:7-32

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