External Shocks and Business Cycle Fluctuations in Mexico: How Important are U.S. Factors?

Sebastian Sosa

No 2008/100, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the relative importance of external shocks as sources of business cycle fluctuations in Mexico, and identifies the dynamic responses of domestic output to foreign disturbances. Using a VAR model with block exogeneity restrictions, it finds that U.S. shocks explain a large share of Mexico's macroeconomic fluctuations after NAFTA. This partly reflects greater trade integration-but also Mexico's "Great Moderation," as the country escaped its former pattern of macro-financial crises. In this period, Mexico's output fluctuations have been closely synchronized with the U.S. cycle, with a large and rapid impact of U.S. shocks on Mexican growth.

Keywords: WP; Mexico; Gdp; export; output (search for similar items in EconPapers)
Pages: 31
Date: 2008-04-01
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Citations: View citations in EconPapers (36)

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