Financial Crisis, Fiscal Policy and the 1995 GDP Contraction in Mexico

Meza, Felipe

doi:10.2139/ssrn.695903

Cited by 12 publications

(14 citation statements)

References 27 publications

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“…Meza (2008), for example, shows that increases in taxes on consumption in 1995 can account for the decrease in labor in a model with a standard utility function. Including taxes in our model, as in Conesa et al (2007), could also help us account for the sharp drop in consumption that occurred in Mexico in 1995.…”

Section: Exogenous Decrease In Tfpmentioning

confidence: 99%

“…Including taxes in our model, as in Conesa et al (2007), could also help us account for the sharp drop in consumption that occurred in Mexico in 1995. As Meza (2008) points out, the value added tax in Mexico increased sharply that year. Tornell and Westermann (2002) point out that severity of this drop was unusual among sudden stop experiences, and our model has trouble accounting for it.…”

Section: Exogenous Decrease In Tfpmentioning

confidence: 99%

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Sudden stops, sectoral reallocations, and the real exchange rate

Kehoe

Ruhl

2009

Journal of Development Economics

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a b s t r a c t JEL classification: E21 F21 F32 F34 F43 O41 O47 O54 Keywords: Sudden stop Developing country crisis Real exchange rate Tradable Nontradable Mexico Total factor productivityA sudden stop of capital flows into a developing country tends to be followed by a rapid switch from trade deficits to surpluses, a depreciation of the real exchange rate, and decreases in output and total factor productivity. Substantial reallocation takes place from the nontraded sector to the traded sector. We construct a multisector growth model, calibrate it to the Mexican economy, and use it to analyze Mexico's 1994-95 crisis. When subjected to a sudden stop, the model accounts for the trade balance reversal and the real exchange rate depreciation, but it cannot account for the decreases in GDP and TFP. Extending the model to include labor frictions and variable capital utilization, we still find that it cannot quantitatively account for the dynamics of output and productivity without losing the ability to account for the movements of other variables.

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Section: Exogenous Decrease In Tfpmentioning

confidence: 99%

Section: Exogenous Decrease In Tfpmentioning

confidence: 99%

Sudden stops, sectoral reallocations, and the real exchange rate

Kehoe

Ruhl

2009

Journal of Development Economics

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“…We use a standard general equilibrium growth model, which has been extensively used to study the macroeconomic effect of taxes (e.g. Hayashi and Prescott (2002); Bergoeing et al (2002); Conesa et al (2007); Chari et al (2007); Meza (2008) and more recently Chari et al (2016)). In this model, taxes and other wedges distort the decisions undertaken by firms and households.…”

Section: Modelmentioning

confidence: 99%

“…In Conesa et al (2007) the authors examine the case of Finland, and in Papageorgiou (2012) the author analyzes the case of Greece. Meza (2008) studies the case of a fiscal reform in Mexico during the 1995 crisis using a growth model with taxes. He finds that the change in fiscal policy accounts for roughly 20% of the fall in aggregate output.…”

Section: Introductionmentioning

confidence: 99%

Fear of taxes

Leal¹,

Mandujano²

2019

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This paper documents that Mexican households anticipated the fiscal reform of 2014 several months before enacted. This change in expectations is documented using a novel source of information available in Google Trends, among other sources. It then analyzes the economic consequences of this change using a general equilibrium growth model with taxes and uncertainty. The model also considers the presence of generic distortions in the form of wedges in the first order conditions to isolate the effect of taxation. The paper provides an explanation for the unusual trajectories of investment and GDP of the Mexican economy around 2013.

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“…A few recent examples include Kehoe and Ruhl (2009), Meza (2008) and Pratap and Urrutia (2010). Some of these exercises have implications for the evolution of the RER during the sudden stop.…”

Section: Introductionmentioning

confidence: 99%