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Title: |
Demand Shocks: Evidence from a Vector
Autoregression Model of Mexico's Recession and Recovery in the 1990s |
| Author: |
De La Cruz
Martinez, Justino |
| Author
Affiliation: |
U TX, San
Antonio |
| Source: |
International Economic Journal, Summer 2003, v. 17, no. 2, pp. 37-53 |
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Publication Date: |
Summer 2003 |
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Abstract: |
We analyze the
recession and recovery of Mexico during the 1990s by estimating a vector
autoregression of aggregate expenditures. The model suggests that, in
addition to fiscal, monetary, and exchange rates policies, "expectational"
shocks played a significant role in the 1995 recession but not in the
insuring recovery. This indicates that when policy factors explain only
a portion of the shocks, the public's pessimism and anxiety about the
future should be considered important in policymaking. Finally, contrary
to the conventional believe that depreciation will raise economic
growth, this study finds that Peso depreciation will bring about a
recession. |
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