A note on intermediate imports and the BPCG model in Mexico

Abstract

Intermediate imports, Balance-of-payments-constrained growth (BPCG) model, Trade liberalization, Bounds testing approach, Mexico, F14, F43, O11, O54,

Trade liberalization and the balance of payments constraint with intermediate imports: The case of Mexico revisited

“…This elimination of insignificant lags was not done inIbarra (2011a). Hence, even though some of the estimates presented here are qualitatively similar to some of the ones in that paper, the present estimates are quantitatively different and have greater statistical precision.…”

“…For example, what appears to be a rise in the income (GDP) elasticity of import demand may be, rather, a reflection of the increases in the shares of manufactured exports and intermediate imports in their respective totals. In this vein, Ibarra (2011aIbarra ( , 2011b has shown that the income elasticity of Mexico's demand for imports of intermediate goods did not increase significantly post-liberalization, once one controls for the fact that the demand for such imports is also a function of manufactured exports. However, Ibarra's work leaves open the question of whether the BP constraint on Mexico's growth was not tightened in another way, for example by an increase in the elasticity of intermediate imports with respect to manufactured exports.…”

“…However, Ibarra (2011aIbarra ( , 2011b Recently, there has been some progress in developing multisectoral BPCG models applied to issues of structural change. Araujo and Lima (2007) and Gouvea and Lima (2010) have constructed a multisectoral version in which, fundamentally, the ratio of income elasticities ( x / m ) in the solution (4) above is replaced by the ratio of trade-weighted averages of sectoral income elasticities of demand for exports and imports, thus allowing for an explicit role for structural changes in the composition of exports and imports to affect the BP-equilibrium growth rate.…”

“…InIbarra (2011a), the structural break dummies were only interacted with the levels. This is another reason why the estimates in the present paper may differ from those earlier ones.…”

The role of intermediate inputs in a multisectoral balance-of-payments-constrained growth model: the case of Mexico

“…In the mid-eighties, however, foreign content of exports acquired a more prominent position in explaining the differences between the estimates. Therefore, we conclude that the imports of intermediate goods due to foreign content of exports are of some importance to understanding the reduction both in the ratio of the income elasticities and the growth rate of the Mexican economy, a result also found by Ibarra (2011). Therefore, Fig.…”