Regional output growth and the impact of macroeconomic shocks in Mexico

Abstract

This paper presents an empirical analysis of the relationship between national and regional output growth in Mexico, and the impact of domestic and international shocks on national, regional and state output movements. Our results suggest that there are similarities, but also significant differences, in real output dynamics across the regions and states of Mexico and that it would be wrong to regard the Mexican economy as a homogeneous entity. The results show that real output growth in Mexico and the United States are linked, but there is no common output trend for the two countries. At the regional level, it appears that North and Central Mexico share similar features, but the path of output growth is more distinctive in South Mexico. Overall, our results suggest that assessments of macroeconomic performance, and related discussions of policy, should pay greater attention to the potential diversity in regional performance.

Regional business cycles in emerging economies: a review of the literature

“…Unlike the rest of the regions, the State of Tabasco, in the central zone of Mexico, showed a high economic performance due mainly to the influence of domestic tourism. In another study, Shepherd et al (2014) study the synchronization of Mexican regions' cycles and find similar results to those of Mej ıa-Reyes (2007). According to these authors, the BC of the northern and central regions of Mexico is more synchronized than those of the south of the country.…”

“…(1997) to analyze the effects of the US recession on each state's economic activity indicator and thus estimate the synchronization across regions. Shepherd et al. (2014) estimate the common shocks among Mexican regions through an autoregressive vector model with independent variables (VARX).…”

“…In the context of Latin America, Mejía-Reyes and Campos-Chávez (2011) show that the relative importance of international trade, FDI, “maquila” production and the productive structure are the main determinants of synchronization in Mexican regions. Subsequent studies for this country identify, as other synchronization factors, the vertical integration of regional production processes (Mejía-Reyes and Díaz-Carreño, 2016) and the distance and the border-effect (Shepherd et al. , 2014).…”

“…Mej ıa-Reyes and D ıaz-Carreño (2016) use the classical BC approach introduced by Artis et al (1997) to analyze the effects of the US recession on each state's economic activity indicator and thus estimate the synchronization across regions. Shepherd et al (2014) estimate the common shocks among Mexican regions through an autoregressive vector model with independent variables (VARX). Finally, Shepherd et al (2017) estimate a series of first-order VARX models with a set of exogenous regressors and five dummy variables to capture the shocks of the years 1982, 1986, 1995, 2001 and 2009, for each of the 32 Mexican states.…”

“…However, the evidence has shown an asynchrony across the national and regional BC. Even within the same regions, at the EMEs level, the cycle is not synchronized (see Gerlach-Kristen, 2009;Carmignani andLaurenceson, 2013 andLiu et al, 2020 for China;Shepherd et al, 2014 andShepherd et al, 2017 for Mexico). Ignorance of this analysis then generates structural distortions at the regional level, which can be compensated with policies that adjust to their own territorial specificities (G omez-Loscos et al, 2020).…”