A Pre-COVID Measure of the Effect of the 2018 Economic Shift in Mexico: Extended Version

17 Pages Posted: 23 Feb 2022

See all articles by Stefano Lord

Stefano Lord

University of Wisconsin - Madison, Department of Economics, Students

Felipe Meza

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Análisis e Investigación Económica

Date Written: January 31, 2022

Abstract

We produce a measure of the pre-COVID economic effect of the 2018 presidential election outcome in Mexico and the subsequent economic changes that the economy experienced. We use the Synthetic Control methodology to estimate a counterfactual for Mexico's GDP per capita in 2010 United States dollars. The result indicates a reduction of $332.00 US dollars by the fourth quarter of 2019. A placebo test indicates that the result is statistically significant at a level of 7.14%. The comparison between counterfactual and observed income shows that GDP had a positive trend until the second quarter of 2018. Starting in the third quarter of 2018, the Mexican economy fell below that trend and displayed a different path with a negative slope. Our results are robust to alternative specifications. Additionally, we show that, at least for the previous presidential term that started in 2012, there was no first-year-of-government effect that was discussed by economists in the media to explain the contraction in 2019. We also find that there was no immediate negative impact on the Mexican economy of the election of Donald J. Trump as president of the United States in 2016, considering that he had an anti-NAFTA rethoric in campaign.

Keywords: Synthetic control; Placebo test; Economic regime change; Mexican economy

JEL Classification: C54, O5

Suggested Citation

Lord, Stefano and Meza, Felipe, A Pre-COVID Measure of the Effect of the 2018 Economic Shift in Mexico: Extended Version (January 31, 2022). Available at SSRN: https://ssrn.com/abstract=4036907 or http://dx.doi.org/10.2139/ssrn.4036907

Stefano Lord

University of Wisconsin - Madison, Department of Economics, Students ( email )

Madison, WI
United States

Felipe Meza (Contact Author)

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Análisis e Investigación Económica ( email )

Av. Camino a Santa Teresa #930
Col. Heroes de Padierna
Mexico City, D.F. 10700
Mexico

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