The dynamics of Mexican manufacturing exports

This article evaluates several of the determinants of Mexican manufacturing exports, using two complementary econometric methods: a structural arima model, which makes it possible to estimate elasticities; and a generalized var model, which provides a fully dynamic perspective by estimating impulse response functions. As some of the findings are robust to changes in the econometric methodology used, the article reaches the following conclusions. First, manufacturing exports are positively related to labour productivity and external demand; so the adverse effects of an international recession on Mexican exports could, to some extent, be offset by raising worker productivity. Second, real exchange-rate depreciation does not increase manufacturing exports, but actually reduces them, at least in the short run. These findings are consistent with the idea that a real depreciation not only affects demand, but also generates strong supply-side effects.