The 1989-94 Consumption Boom in Mexico: An Analysis of Cointegration Using Regime Shifts

29 Pages Posted: 30 Apr 2001

Date Written: April 2001

Abstract

We argue that the consumption boom observed in Mexico between 1989 and 1994 can be accurately identified and evaluated if the model for the cointegration relationship between consumption and income allows regime shifts. Using Markov-switching models, we show that the introduction of the program for stabilization and economic reform at the end of 1987 led to a shift from a regime with a cointegrating vector with unitary income elasticity to another involving an elasticity close to 1.3. Also, we show that the vector with unitary elasticity was re-established when a currency and financial crisis erupted at the beginning of 1995.

Keywords: cointegration, consumption, Markov-switching models, Mexico, Regime-switching models

JEL Classification: C19, C22, C50

Suggested Citation

Gonzalez-Garcia, Jesus, The 1989-94 Consumption Boom in Mexico: An Analysis of Cointegration Using Regime Shifts (April 2001). Available at SSRN: https://ssrn.com/abstract=267316 or http://dx.doi.org/10.2139/ssrn.267316

Jesus Gonzalez-Garcia (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Room: HQ2 10A-572
Washington, DC 20431
United States
(202) 6236310 (Phone)
(202) 6236159 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
136
rank
208,052
Abstract Views
1,123
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information