Mexico Business Cycle

Topics: Macroeconomics, Business cycle, Monetary policy Pages: 4 (1272 words) Published: December 10, 2008
Mexico’s Business Cycle

The term business cycle or economic cycle refers to the fluctuations of economic activity around its long-term growth trend. It involves shifts over time between periods of relatively rapid growth of output-recovery and prosperity, and periods of relative stagnation or decline- contraction or recession. These fluctuations are often measured using real gdp.

Despite being termed cycles, these fluctuations in economic growth and decline do not follow a purely mechanical or predictable periodic pattern. In recent years economic theory has moved towards the study of economic fluctuation rather than a 'business cycle'. Some economists believe calling the business cycle a "cycle" to be a misnomer, because of its non-cyclical nature.

They believe that for the most part, excluding very large supply shocks, business declines are more of a monetary phenomenon. However, the term is still widely used. Mexico's economy has achieved broad stability and enhanced resilience in recent years, and the country has enjoyed steady growth. Although linked strongly to the currently weak US economy, several factors including the modest external current account deficit, helped by the high oil export prices, FDIs, low external debt ratios, comfortably positioned FE reserves, well supervised financial regulations and well capitalized, liquid and profitable banks have contributed towards strengthening Mexico’s position.

Business cycles in the developing world are fairly unfamiliar to the general world even today. A major issue facing developing economies may be the presence of a greater degree of uncertainty compared to developed economies. Characteristics of business cycles- Fluctuations of aggregate economic activity. 2.Cycles Expansion/Boom and Contraction/Recession. Peak and Trough being the turning points of the business cycle. Comovements of many macro variables over the business cycle. Business Cycles are Recurrent but not...
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