Synchronization of Economic Activity between Mexico and the US: What are the Causes?

Ramón A. Castillo Ponce; Rogelio Varela Llamas; Juan Manuel Ocegueda Hernández

doi:10.4067/S0718-88702010000100002

Authors

Ramón A. Castillo Ponce California State University, Los Angeles, and Universidad Autónoma de Baja California
Rogelio Varela Llamas Universidad Autónoma de Baja California
Juan Manuel Ocegueda Hernández Universidad Autónoma de Baja California

DOI:

https://doi.org/10.4067/S0718-88702010000100002

Keywords:

Synchronization, common trends, common cycles, manufacturing, consumption, service sector

Abstract

Using data on manufacturing production for the entire industry and 8 of its 9 divisions, we find little evidence of synchronization between manufacturing output in Mexico and the US. Hence, it is unlikely that the synchronization of the business cycles of these two countries emerged as the result of the synchronization of economic activity in the manufacturing industry, as previous studies have suggested. Given these results, we propose two alternatives for explaining business cycles synchronization: the dynamics of the gross domestic product SYNCHRONIZATION OF ECONOMIC ACTIVITY BETWEEN MEXICO AND THE US: WHAT ARE THE CAUSES?**** SINCRONIZACIoN DE LA ACTIVIDAD ECONoMICA ENTRE MeXICO Y LOS ESTADOS UNIDOS: ¿CUaLES SON LAS CAUSAS? of the service sector and aggregate consumption. We show that both Mexican variables share common trends and common cycles with their US counterparts. We recommend further research to evaluate how these aggregates have contributed to the synchronization of the business cycles in Mexico and the US.

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