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Endogenous growth in Mexico: The role of US economic activity and balance of payments transfers

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  • Alejandro Rodriguez Arana

    (Universidad Iberoamericana)

Abstract

This paper calibrates an AK model of growth for Mexico. Investment financing is modeled considering the domestic savings ratio as well as net factorial income and capital inflows of the balance of payments. According to this model, actual parameters determining growth in Mexico are compatible with a long run rate of growth of about 3.6%. Under these circumstances, the ratio of the Mexican GDP to US GDP grows in time. Sustained growth depends heavily upon balance of payments transfers, which nowadays are conformed mainly by family remittances and the US economic growth, variables that nobody in Mexico can control. This fact implies that the domestic savings rate is very low. The paper concludes that to assure a positive growth that improves standards of living and the relative size of Mexico with respect to the US, policies to increase the domestic savings rate and productivity are necessary.

Suggested Citation

  • Alejandro Rodriguez Arana, 2007. "Endogenous growth in Mexico: The role of US economic activity and balance of payments transfers," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 3(2), pages 7-32, Enero-Jun.
    • Handle: RePEc:qua:journl:v:3:y:2007:i:2:p:7-32
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    References listed on IDEAS

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    1. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
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    More about this item

    Keywords

    Growth; remittances; savings.;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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