?Se encuentran sincronizados los ciclos economicos de los estados mexicanos con aquellos de Estados Unidos? Evidencia que presenta la produccion manufacturera.
| Autor | Mejia-Reyes, Pablo |
Are the Mexican States and the United States Business Cycles Synchronized? Evidence from the Manufacturing Production
Introduction
The last two decades have witnessed a huge increase in international transactions of goods, services and capitals, as a result of trade and investment liberalization policies instrumented by several countries. Consequently, most economies over the world have become more interrelated, and international transactions have become fundamental mechanisms in the transmission of national shocks to other economies (Anderson, Kwark and Vahid, 1999; Otto, Voss and Willard, 2003; Baxter and Kouparitsas, 2005). In particular, several papers have documented a high synchronization between the business cycles of various groups of countries in a process where the United States (US) has played a central role, given that its business cycles seem to lead those of other economies, especially their most important trade partners (Artis, Krolzig and Toro, 2004; Mejia, 2004; Calderon and Fuentes, 2006; Aiolfi, Catao and Timmerman, 2006; Arora and Vamvakidis, 2001; Torres and Vela, 2003; Osborn, Perez and Sensier, 2005).
Although several papers addressing the dynamics of international business cycles have been written during the last years for different geographical areas, one topic that has attracted less attention from scholars is related to the sector and regional impacts of national and international fluctuations. This is an important issue, given that specific sector and/or regional cycles can differ from the aggregate one and can absorb the international shocks in a different manner, depending on aspects such as the structure of production, sector and local economic policies, or financial conditions, infrastructure and weather, among others. (1)
In the case of Mexico, several important business cycle stylized facts at an aggregate level have been recently documented, (2) but the analysis of the nature of regional and state business cycles has received less attention in the literature. Although the importance of this subject may be apparent, there are only a few papers addressing this phenomenon. Some of them are those of Ponce (2001), and Del Negro and Ponce (1999), who use a factor model methodology and vector autoregressions, and report that national fluctuations are the main source of state fluctuations. Cuevas, Messmacher and Werner (2003), in turn, argue that the cyclical fluctuations of the Southern region are largely independent, that the central states are more sensible to fiscal and other idiosyncratic perturbations, and that the Northern states' fluctuations are synchronized with the dynamics of the US economy. Recently, Erquizio (2008) has analyzed the dynamics of the cyclical fluctuations of several states and defined a coincident index for each case. Indeed, he concludes that state cycles differ from each other and with respect to the national cycle. Finally, Mejia (2007) uses a classical business cycle approach to document asymmetries in mean, volatility and duration of the Mexican state cycles.
In this context, we aim to contribute to a better understanding of the dynamics of specific business cycles by analysing the degree of synchronization of the Mexican states' business cycles with that of the US. To do so, we apply the conventional methodology introduced by Kydland and Prescott (1990) to measure the degree of co-movement between the corresponding business cycle indicators over the period 1993-2007. Our findings suggest that this synchronization has been heterogeneous across states, and that only a few of them exhibit a high degree of co-movement with the US business cycle; our conjecture is that these results may be explained by the relative importance of international trade, foreign direct investment, "maquila" production and productive structure. The robustness of our results is evaluated by using three alternative de-trending filters, namely the corrected version of Hodrick and Prescott's filter (1997), introduced by Ravn and Uhlig (2002), the Christiano and Fitzgerald's filter (2003), and the annual growth rate.
This paper is organized as follows. In section I we present some basic statistics about the productive performance of the Mexican states, as well as data on the importance of their international transactions. Section II describes the methodology to be used and the data set. In section III we apply that methodology and discuss the results. Finally, we state some conclusions.
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Manufacturing production performance and international transactions
The analysis of the business cycle synchronization carried out in this paper is based on manufacturing production indexes, since they are the only indicators of output available on a monthly basis for a reasonable length of time. Some information about the importance of manufacturing production in the Mexican states and the magnitude of its international economic integration is presented in table 1.
Column (1) in table 1 reports the share of manufacturing production (MAN) in gross domestic product (GDP) for each state, which can help us to figure out the relevance of this sector in the state economic dynamics. It can be observed that this sector is especially important in the cases of Coahuila, Queretaro and the state of Mexico, since its participation in total output exceeds 30 per cent, while in another six states that proportion lies above 20 per cent, which equals the corresponding proportion in the national aggregate. In turn, figures of column (2) suggest a high concentration of the national manufacturing production in a few states: above one third of it is generated exclusively in the state of Mexico and the Federal District. If we add the production of the next three most important states, namely Coahuila, Jalisco and Nuevo Leon, the sum rises above 50 per cent. It is important to highlight that industrialization in these states, except Coahuila, started in the framework of the import substitution strategy instrumented in Mexico from the 1950's. Thus, although there has been some dispersion of production across the Mexican states, especially in favor of the Northern ones, a high concentration still remains (see Messmacher, 2000; Aroca, Bosch and Maloney, 2005; Chiquiar, 2005). (3) One implication of these figures is that the international synchronization of different Mexican aggregate output measures reported by some authors may be explained by the dynamics of these few states.
The average annual growth rates and volatility of manufacturing production are presented in columns (3) and (4). It is noticeable that manufacturing production exhibits a lower growth in those states where it represents a higher proportion of the national aggregate: in the average, the state of Mexico, Jalisco and the Federal District have presented the lowest rates over the period 1997-2007 (2.1, 2.0 and 1.2, respectively). However, as an advantage, these growth rates are some of the most stable in the sample, as measured by their standard deviations. On the contrary, some of the states with higher growth rates are also the most volatile, such as Aguascalientes, Baja California, Puebla and Sonora.
On the other hand, from the international integration perspective, several papers have highlighted the importance of "maquila" production both as a part of the national manufacturing output as well as a significant link to the US productive activities through intra-industry and intra-firm trade (4) (Hanson, 1998; Acevedo, 2002; Mejia, 2003c; Bergin, Feenstra and Hanson, 2008; Waldkirch, 2008). To illustrate this issue, column (5) in table 1 shows the share of each state "maquila" production in the total of the economy. The concentration degree is higher in the case of this variable: Baja California produces more than 20 per cent of the national "maquila" production. Although far away from that figure, "maquiladoras" have also some importance in other frontier states, such as Coahuila (7.5%), Sonora (6.9%) and Nuevo Leon (5.4%). The rest of the national "maquila" production is distributed among the other states (especially Jalisco, with 4.2%). Thus, "maquiladoras" are expected to play an important role in the transmission of external shocks in these states.
In turn, international synchronization of national and regional business cycles can result from the transmission of specific shocks from one economy to another through international transactions. In particular, some authors have argued that international trade is a central mechanism in such process, especially when it assumes the form of intra-industry trade, with a high component of intra-firma transactions; moreover, trade liberalization may enhance its effects (see Canova and Dellas, 1993; Anderson, Kwark and Vahid, 1999; Otto, Voss and Willard, 2003; Baxter and Kouparitsas, 2005; Osborn, Perez and Sensier, 2005). On the other hand, foreign direct investment (FDI) has contributed to the internationalization of production, which has caused it to become an important transmission channel of shocks hitting the source and the host economies, especially in this era of globalization (Hanson and Slaughter, 2003; Jansen and Stokman, 2003). Furthermore, some papers have highlighted the importance of multinational firms in the recently observed increase in international trade flows resulting from vertical integration of their productive processes. (5) To shed some light on the importance of these variables in the integration of the Mexican states, columns (6) and (7) report the structure of exports ([X.sub.i]/X) and foreign direct investment ([FDI.sub.i]/FDI) by state, respectively. (6) A very high concentration is observed in these two cases: according to the data, the Federal District stands for about 28 per cent of total exports, and hosts above 57 per cent of foreign direct investment. Although this information should be taken with caution given that it is strongly affected by the addressed...
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