Regional output growth and the impact of macroeconomic shocks in Mexico

This paper presents an empirical analysis of the relationship between national and regional output growth in Mexico, and the impact of domestic and international shocks on national, regional and state output movements. Our results suggest that there are similarities, but also significant differences, in real output dynamics across the regions and states of Mexico and that it would be wrong to regard the Mexican economy as a homogeneous entity. The results show that real output growth in Mexico and the United States are linked, but there is no common output trend for the two countries. At the regional level, it appears that North and Central Mexico share similar features, but the path of output growth is more distinctive in South Mexico. Overall, our results suggest that assessments of macroeconomic performance, and related discussions of policy, should pay greater attention to the potential diversity in regional performance.