## External Shocks and Business Cycle Fluctuations in Mexico: How Important are U.S. Factors?

_IMF Working Papers, April 1, 2008_

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## Bibliographic details
- Authors: Sebastian Sosa
- Published: April 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451869613.001

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### Research question and scope
- Examines the relative importance of external shocks as sources of business cycle fluctuations in Mexico.
- Identifies the dynamic responses of domestic output to foreign disturbances.
- Timeframe and focus: period after NAFTA, when Mexico experienced a "Great Moderation" and closer synchronization with the U.S. cycle.

### Methodology
- Uses a VAR model with block exogeneity restrictions to isolate the effects of foreign (U.S.) shocks on Mexican macroeconomic variables.

### Key findings
- U.S. shocks explain a large share of Mexico's macroeconomic fluctuations after NAFTA.
- Mexico's greater trade integration partly accounts for the influence of U.S. shocks.
- Mexico's "Great Moderation"—escaping its former pattern of macro-financial crises—also contributes to the stronger role of U.S. factors.
- In the post-NAFTA period, Mexico's output fluctuations have been closely synchronized with the U.S. cycle.
- U.S. shocks have a large and rapid impact on Mexican growth.

### Subject areas and keywords
- Subject: Business cycles, Exports, Imports, Industrial production, Oil prices
- Keywords: export, Gdp, Mexico, output, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/external-shocks-and-business-cycle-fluctuations-in-mexico-how-important-are-u-s-21892_