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Abstract:
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This paper finds that shocks to net financial inflows, world oil prices, the U.S.
growth rate, and the lagged real exchange rate explain most of the fluctuations
in Mexico’s annual growth since 1979. The paper also estimates how the effects
of these external constraints have changed since Mexico’s liberalization policies
of the late 1980s and the formation of NAFTA in 1994. Estimates of an
investment function and other tests show that growth drives investment but
not conversely, in the short run. Investment is driven mainly by oil prices
and the accelerator effect; foreign direct investment has no significant impact. |