GDP Growth, Potential Output, and Output Gaps in Mexico

31 Pages Posted: 3 Mar 2006

Date Written: May 2005


This paper analyzes the sources of Mexico's economic growth since the 1960s and compares various decompositions of historical growth into its trend and cyclical components. The role of the implied output gaps in the inflationary process is then assessed. Looking ahead, the paper presents medium-term paths for GDP based on alternative assumptions for productivity growth rates. The results indicate that the most important factor underlying the slowdown in output growth was a decline in trend total factor productivity growth. Economic policy reforms and the introduction of NAFTA may have raised trend productivity growth in recent years. Further increases in productivity growth would appear necessary, however, to raise medium-term growth.

Keywords: GDP growth, potential output, output gap, inflation, Mexico

JEL Classification: E25, E31, E32, E37

Suggested Citation

Faal, Ebrima, GDP Growth, Potential Output, and Output Gaps in Mexico (May 2005). IMF Working Paper No. 05/93, Available at SSRN:

Ebrima Faal (Contact Author)

African Development Bank ( email )

+216 7110 3775 (Phone)

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