The relative importance of foreign and domestic shocks to output and prices in Mexico and Colombia

The Relative Importance of Foreign and Domestic Shocks to Output and Prices in Mexico and Colombia. — This paper utilizes structural VARs to evaluate the relative importance of foreign and domestic sources of variation in output and prices in Mexico and Colombia. The real exchange rate and commodity export price have a large impact on both output and prices in Mexico, while in Colombia their effects are smaller. U. S. output and interest rates are found to play a significant role in determining output in Mexico and Colombia. For Mexico, external variables are found to be of much greater importance in the oil-exporting years after 1978 as compared to the 1960s.