Economic Crisis in Mexico and Central America

  •  Luis Rene Caceres    


This paper analyzes the characteristics of economic crises in Mexico and Central America, emphasizing their causes and persistence. The results indicate that the crisis defined as the contraction to negative values of economic growth rates in the countries under analysis are not persistent, but the crises originated by the contraction of the US growth rate are persistent. The analysis also addresses the effects of the crises on other variables, finding that they have an impact on the increase in unemployment, remittances, the underground economy, violence, and the fall in productivity. In other words, the original crisis gives rise to the emergence of other crises, which are the ones that explain the economic cycle. The implication is that economic recovery after the crisis, and the shielding of the economy from being affected by crises, requires investments in social development and governance, as well as the protection of the productive sectors. In turn, these investments determine the business cycle. The paper concludes with a series of considerations on appropriate policies to shield economies from external shocks and to achieve early recovery.

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