Have Mexico and the United States synchronized their economic cycles with TLCAN?

With the application of a structural times series model with a generalized stochastic specification cycle, we investigate whether or not the business cycles of Mexico´s PIB showed a greater synchronization with the US PIB since the enforcement of the North American Free Trade Agreement (TLCAN), compared to the previous period. To this end we test the null hypothesis of a common cycle, as defined in the structural models employed by Carvalho, Harvey y Trimbur (2007), against the hypothesis of a similar cycle between both economies. The presence of a common economic cycle between both countries implies that one is proportional to the other (Harvey 2002). Our evidence shows that before TLCAN was enforced (1960:1-1994:4), both economies did not share a common cycle. On the contrary, after the signing of TLCAN (1995:1-2012:4), it is not possible to reject the hypothesis of a common economic cycle between both countries. This, we interpret as a greater synchronization of their products. We note, however, that compared to the previous period the cyclical synchronization occurs in a period, of slow growth where TLCAN trade flows with United States declined relatively since 2000. This questions the merits of the synchronization explained in Mexico as derived from commercial opening due to TLCAN.