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Business Cycles in Mexico and the United States: Do They Share Common Movements?

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  • Jorge Herrera Hernández

Abstract

In this document I apply a recently developed econometric technique to prove the existence of common movements between time series. Said methodology is used to test and measure the existence of common cycles between the economies of Mexico and the United States for the 1993–2001 period. It is found that both economies share a common trend and a common cycle. Also, given the existence of one common cycle between these economies, it is found that transitory shocks affecting Mexico's GDP are more important than when a conventional trend-cycle decomposition methodology is applied. Finally, it is shown that there are efficiency gains in forecasting by considering the common cycle restriction in a bivariate vector error correction model that includes the Mexican and the U.S. GDPs.

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  • Jorge Herrera Hernández, 2004. "Business Cycles in Mexico and the United States: Do They Share Common Movements?," Journal of Applied Economics, Taylor & Francis Journals, vol. 7(2), pages 303-323, November.
    • Handle: RePEc:taf:recsxx:v:7:y:2004:i:2:p:303-323
    DOI: 10.1080/15140326.2004.12040613
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    Cited by:

    1. Hideaki Hirata & M. Ayhan Kose & Chris Otrok, "undated". "Regionalization vs. Globalization," Working Paper 164456, Harvard University OpenScholar.
    2. Jean Louis, Rosmy & Brown, Ryan & Balli, Faruk, 2011. "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?," Economic Modelling, Elsevier, vol. 28(6), pages 2701-2718.
    3. Raul Ibarra & Luis M. Gomez-Zamudio, 2017. "Are Daily Financial Data Useful for Forecasting GDP? Evidence from Mexico," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 173-203, April.
    4. Adom, Assandé Désiré & Sharma, Subhash C. & Morshed, A.K.M. Mahbub, 2010. "Economic integration in Africa," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(3), pages 245-253, August.
    5. Ms. Yan M Sun & Mr. Wendell A. Samuel, 2009. "ECCU Business Cycles: Impact of the U.S," IMF Working Papers 2009/071, International Monetary Fund.
    6. Louis, Rosmy J & Brown, Ryan & Balli, Faruk, 2009. "Are Mortgage Rates Bubbling Up Trouble for Canadas Metropolitan Housing Sector?," MPRA Paper 17245, University Library of Munich, Germany.
    7. Willie Lahari, 2011. "Assessing Business Cycle Synchronisation - Prospects for a Pacific Islands Currency Union," Working Papers 1110, University of Otago, Department of Economics, revised Oct 2011.

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