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Trade liberalization and the balance of payments constraint with intermediate imports: the case of Mexico revisited

Robert Blecker () and Carlos Ibarra

No 2013-02, Working Papers from American University, Department of Economics

Abstract: Previous studies have found that a tightening of the balance of payments (BP) constraint can explain the slowdown in Mexico’s growth after its trade liberalization in the late 1980s. This paper develops a disaggregated model of the BP constraint with two types of exports (manufactured and primary commodities) and two types of imports (intermediate and final goods). Econometric estimates (including tests for structural breaks) show that the BPequilibrium growth rate did not fall, but instead rose in the post-liberalization period, so this model cannot account for the country’s growth slowdown. Instead, the analysis points to the need to consider the real exchange rate as well as internal obstacles and policies.

Date: 2013
New Economics Papers: this item is included in nep-his and nep-opm
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https://doi.org/10.17606/qtg0-yh29 First version, 2013 (application/pdf)

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