Book(electronic)2008

External Shocks and Business Cycle Fluctuations in Mexico

In: IMF Working Papers

Sosa, Sebastian

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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. cyc

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Book(electronic)#12008

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

In: IMF Working Papers Working Paper No. 08/100

Sosa, Sebastian; Sosa, Sebastian

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