Trade integration and synchronization between the business cycles of Mexico and the United States

Torres, Alberto; Vela, O.

doi:10.1016/s1062-9408(03)00025-1

Cited by 62 publications

(36 citation statements)

References 9 publications

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“…Several studies focusing on Mexico-U.S. synchronization since the inception of NAFTA conclude that tighter trade linkages have increased Mexico's degree of correlation with the U.S. economy. 3 3 See, for example, Torres and Vela (2003); Kose, Meredith, and Towe (2004);Chiquiar and Ramos-Francia (2005); Lederman, Maloney, and Servén (2005); Bergin, Feenstra, and Hanson (2009);Fiess (2007);Sosa (2008);and Swiston and Bayoumi (2008). The latter study also finds that greater U.S.-Canada integration increased the synchronicity of those countries' business cycles.…”

Section: A Trade Integrationmentioning

confidence: 99%

Spillovers to Central America in Light of the Crisis: What a Difference a Year Makes

Swiston

2010

IMF Working Papers

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* This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper investigates Central America's external linkages over the last fifteen years of increased integration in light of the 2008-09 global recession. Using structural VAR models, it is found that a one percent shock to U.S. growth shifts economic activity in Central America by 0.7 to 1 percent, on average. Spillovers from global shocks and the rest of the region also affect activity in some countries. Spillovers are mostly transmitted through advanced country financial conditions and fluctuations in external demand for Central American exports. Shocks to advanced economies associated with the 2008-09 financial crisis lowered economic activity in the region by 4 to 5 percent, on average, accounting for a majority of the observed slowdown. The impact was almost twice as large as elasticities estimated on pre-crisis data would have predicted. These results underscore the importance of operating credible policy frameworks that enable a countercyclical policy response to external shocks. JEL Classification Numbers: E32, F15, F40

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Section: A Trade Integrationmentioning

confidence: 99%

Spillovers to Central America in Light of the Crisis: What a Difference a Year Makes

Swiston

2010

IMF Working Papers

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“…Previous empirical work on the growth process in Mexico has mainly focused on aggregate macroeconomic performance, examining factors such as the structure of the business cycle, the degree of co-movement with the US economy, and the impact of various domestic and international events, such as the 'Tequila crisis' and the formation of the NAFTA (Castro, Loría, and Mendoza 1997;Urzúa et al 2000;Castillo and Diaz-Baustista 2002;Torres and Vela 2003;Hernandez 2004Hernandez , 2006Gutiérrez, Mejía, and Cruz 2005;Cardero, Mántey, and Mendoza 2006;Ruiz-Galindo and Venegas 2007;Sosa 2008). While these aggregate studies have yielded important insight about the behaviour of the economy, it is important to recognize that national indicators may conceal marked differences at the regional or local level and, where data allows, it is useful to supplement assessments of national performance with an equivalent examination of regional performance.…”

Section: Introductionmentioning

confidence: 99%

Regional output growth and the impact of macroeconomic shocks in Mexico

Shepherd

Torres

Mendoza

2014

International Review of Applied Economics

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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.

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“…Using descriptive statistics, Arndt (2006) has argued that de facto integration has been occurring as a result of cross-border production networks which have reduced cyclical divergence of the two economies, thereby providing a justification for monetary union. Similar results were shown for Mexico by Torres and Vela (2003). Michelis (2004) analyzed trade data, and GDP correlations, and tested for co-integration to find that Canada and the US satisfied the necessary conditions for an OCA, while Mexico and the US did not satisfy those conditions.…”

Section: Section 3: Related Literaturementioning

confidence: 70%

On the feasibility of monetary union: Does it make sense to look for shocks symmetry across countries when none of the countries constitutes an optimum currency area?

2011

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Usually, a monetary union is not considered feasible between countries if the correlations of shocks are positive but weak. This may not be so if the country with the larger output gap converges to full-employment equilibrium faster than the country with the smaller gap. We argue that common monetary policy can be destabilizing when countries' responses to non-monetary shocks are perfectly symmetric with a correlation of 1 but exhibit differing investment sensitivities to the real interest rate. We use Canada, Mexico and the United States to test the feasibility of a monetary union by documenting whether: 1) gross investments in Canada and Mexico are equally responsive to the real fund rate, and 2) Canada's and Mexico's output growth and inflation respond differently to US monetary policy shocks and oil price shocks. This approach implicitly dictates whether the shocks themselves are symmetric or asymmetric. Using quarterly data and SVAR methodology, we conducted two layers of analysis. We estimated SVARs for the periods 1970-2008, 1970-1990 and 1991-2008 to find that a monetary union is feasible between Canada and the US for the first two sample periods. For Canada and Mexico, we find similar responses of output growth to US monetary policy shocks. We conducted further robustness tests by estimating two identified VARs with common US variables and oil prices for Canada and Mexico to assess commonality in responses to shocks with the US. These results affirm that a monetary union is also feasible between Canada and the US. *We thank an anonymous referee for helpful comments and Megan Foster for help with proofreading. The usual caveat about remaining errors applies.

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Trade integration and synchronization between the business cycles of Mexico and the United States

Cited by 62 publications

References 9 publications

Spillovers to Central America in Light of the Crisis: What a Difference a Year Makes

Spillovers to Central America in Light of the Crisis: What a Difference a Year Makes

Regional output growth and the impact of macroeconomic shocks in Mexico

On the feasibility of monetary union: Does it make sense to look for shocks symmetry across countries when none of the countries constitutes an optimum currency area?

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