Mexico’s slow-growth paradox

This paper analyzes the problem of slow economic growth In Mexico. It decomposes the growth of output from the demand side and reveals the critical rote played by the sluggish performance of investment. Using econometric tools, it argues that this sluggishness can be explained in part by the peso’s appreciation during disinflation and its adverse impact on investment profitability. Finally, it shows that the problem has been complicated by a long-run decline in the GDP/capital ratio.