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Exporting without growing: Investment, real currency appreciation, and export-led growth in Mexico

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  • Carlos Ibarra

Abstract

Despite two positive developments - the rise of manufactured exports and a prolonged but eventually successful disinflation - Mexico failed to sustain a high rate of economic growth during its free-trade period 1988-2006. The paper argues that the proximate cause of Mexico's growth failure is the low dynamism of investment, which resulted from the high share of maquila (or assembly goods) in manufactured exports and the real appreciation of the peso during disinflation. The argument is supported by two strands of evidence: an aggregate-demand decomposition that measures the contributions of investment and exports to GDP growth, and the estimation by Johansen's methodology of two- and three-equation cointegration models that show the effect of manufactured exports and the real exchange rate on total investment.

Suggested Citation

  • Carlos Ibarra, 2010. "Exporting without growing: Investment, real currency appreciation, and export-led growth in Mexico," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 19(3), pages 439-464.
    • Handle: RePEc:taf:jitecd:v:19:y:2010:i:3:p:439-464
    DOI: 10.1080/09638190802593418
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    Citations

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    Cited by:

    1. Carlos Carrasco & Jesus Ferreiro, 2013. "Inflation targeting in Mexico," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(3), pages 341-372.
    2. Blecker, Robert A. & Ibarra, Carlos A., 2013. "Trade liberalization and the balance of payments constraint with intermediate imports: The case of Mexico revisited," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 33-47.
    3. Carlos A. Ibarra, 2014. "Trade, investment, and capital flows:Mexico's macroeconomic adjustment to the Great Recession," Working Paper Series Sobre México 2014002, Sobre México. Temas en economía.
    4. Carrasco, Carlos A., 2013. "El Nuevo Consenso Macroeconómico y la mediocridad del crecimiento económico en México [New Consensus Macroeconomics and the mediocrity of economic growth in Mexico]," MPRA Paper 53391, University Library of Munich, Germany.
    5. Carlos A. Ibarra & Robert A. Blecker, 2016. "Structural change, the real exchange rate and the balance of payments in Mexico, 1960–2012," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(2), pages 507-539.
    6. Christian Deblock & Michèle Rioux, 2010. "NAFTA – A Model Running Out of Breath?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(04), pages 9-16, December.
    7. Fullerton, Thomas M., Jr. & Kababie, Kababie & Boehmer, Charles R., 2012. "International trade and economic growth in Mexico," MPRA Paper 42991, University Library of Munich, Germany.

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