Abstract
This article shows empirical evidence about Thirwall’ (1979) model on the balance of payments constraint to growth for Mexico. Thirwall states that the relevant variables in the explanation of economic growth are the income elasticities of exports and imports and the income from the rest of the world.
The latter variable is approximated, in this work, by the world GDP. The obtained results, by analyzing the period 1929-2003, suggest only the existence of a long-term relationship between Mexico’s GDP and global GDP over the period 1988-2009. The direction of causality between global and Mexico’s GDP, as expected, goes from the first to the last according to the dynamics of the estimated error correction model.
No evidence was found that both variables were related in a longer period, which can be attributed to the fact that the Mexican economy was essentially closed up until the eighties. This differs from other studies in which the US GDP is used as a proxy of the world GDP.
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