This paper proposes an explanation of Mexico's economic evolution during the period in which its neoliberal strategy has been consolidated and consistently implemented. The focus is on global issues. The paper provides an interpretation of macroeconomic developments and the factors behind Mexico's slow growth, with an emphasis on economic policies and their consequences. A particularly important factor is the phenomenal growth of the import coefficient. On the basis of previous findings, the paper also presents some prospective scenarios for Mexico. The main purpose of the exercises is to show the difficulties faced by Mexico, which is very open to international trade, in combining fast growth with external balance.
Verónica De Jesús Romo and Julio López Gallardo
In this paper we study the determinants of the real exchange rate (RER), analysing in particular its association with the share of wages in output. We model the behavior of the RER against the US dollar of the domestic currency of three countries: Mexico, Korea, and France. We specify econometric vector autoregression (VAR) models and find for each country a long-run relation for the RER. In the three cases, we identify a negative association between the RER and the wage share and the RER, and the difference between the domestic and the US nominal interest rate. We also find that the RER is positively associated with labor productivity in Korea and France, but negatively associated in Mexico. We then suggest theoretical reasons for the type of associations found. As a corollary, we discuss the reasons that may explain why the RER tends to return to a long-run ‘normal’ value.