The Effects of Crime on the Mexican Economy: A Vector Error Correction Model

Economics Bulletin, Volume 35, Issue 2, pages 959-967, April 2015

10 Pages Posted: 11 Apr 2015

See all articles by Diana Carreon-Guzman

Diana Carreon-Guzman

Universidad de Monterrey (UDEM)

Jorge Garza-Rodriguez

Universidad de Monterrey

David Garza-Turrubiates

Universidad de Monterrey (UDEM)

Ricardo Gonzalez-Camargo

Universidad de Monterrey (UDEM)

Eugenio Lozano-Castillo

Universidad de Monterrey (UDEM)

Date Written: April 9, 2015

Abstract

The aim of this study was to examine the extent to which crime affects the components of aggregate demand and vice versa for the case of Mexico, using quarterly data for the number of homicides and the components of aggregate demand for the period from 1990 to 2010. We estimated a Vector Error Correction Model in order to be able to distinguish the short run and long run dynamics present between crime and aggregate demand and its components. In the short run, it was found that none of the components of aggregate demand affect crime and that the only component of aggregate demand affected by crime is private consumption, which is affected negatively by an increase in the crime rate. It was also found that crime has a positive effect on GDP, government consumption and imports in the long run. On the other hand, private consumption, investment and exports have a negative effect on crime in the long run. Thus, the results obtained in this study indicate the existence of a bidirectional relationship between crime and economic activity in Mexico.

Keywords: Crime, Economic Growth, Growth, Macroeconomics, Mexico

JEL Classification: E2, K4

Suggested Citation

Carreon-Guzman, Diana and Garza-Rodriguez, Jorge and Garza-Turrubiates, David and Gonzalez-Camargo, Ricardo and Lozano-Castillo, Eugenio, The Effects of Crime on the Mexican Economy: A Vector Error Correction Model (April 9, 2015). Economics Bulletin, Volume 35, Issue 2, pages 959-967, April 2015 . Available at SSRN: https://ssrn.com/abstract=2592801

Diana Carreon-Guzman

Universidad de Monterrey (UDEM) ( email )

Av. Morones Prieto 4500 Pte.
Monterrey, Nuevo León 66238
Mexico

Jorge Garza-Rodriguez (Contact Author)

Universidad de Monterrey ( email )

venida Ignacio Morones Prieto 4500 Pte
San Pedro, 66238
Mexico

David Garza-Turrubiates

Universidad de Monterrey (UDEM) ( email )

Av. Morones Prieto 4500 Pte.
Monterrey, Nuevo León 66238
Mexico

Ricardo Gonzalez-Camargo

Universidad de Monterrey (UDEM) ( email )

Av. Morones Prieto 4500 Pte.
Monterrey, Nuevo León 66238
Mexico

Eugenio Lozano-Castillo

Universidad de Monterrey (UDEM) ( email )

Av. Morones Prieto 4500 Pte.
Monterrey, Nuevo León 66238
Mexico

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