Distinguishing NAFTA from the peso crisis

North American Free Trade Agreement ; Financial crises - Mexico ; Devaluation of currency ; Peso, Mexican

Real trade-weighted value of the dollar holds, despite fall against the yen and mark

International trade

Has NAFTA changed North American trade?

The controversy over the success or failure of NAFTA is now bleeding over into discussion about the benefits of extending the trade accord to other countries in the Western Hemisphere. The NAFTA debate has typically focused on its impact on employment. But to understand the overall economic effects of NAFTA, it is important to first determine its impact on trade. In this article, David Gould explores NAFTA's effects on North America's trading patterns since its implementation in 1994. He finds that although it is difficult to distinguish any effect of NAFTA on trade between Canada and Mexico or Canada and the United States, trade between the United States and Mexico has significantly increased since 1994.North American Free Trade Agreement ; Free trade

Mexico's crisis: looking back to assess the future

Mexico's most recent economic crisis took many in the international business community by surprise. In early December 1994, the Blue Chip consensus forecast for 1995 Mexican real GDP growth was 3.8 percent. A few weeks later, on December 20, the devaluation of the Mexican peso rocked international financial markets. What first appeared to be a minor correction in Mexico's nominal exchange rate quickly developed into a broader financial crunch felt in and outside Mexico. The Mexican government now expects the country's real GDP to fall about 3 percent in 1995; some private economists suggest an even greater decline.Gross domestic product ; Financial crises - Mexico ; Mexico

Does the choice of nominal anchor matter?

The conventional wisdom on nominal anchors is that exchange rate-based inflation stabilizations lead to economic booms while monetary-based stabilizations lead to recessions. This study finds strong evidence against this view. Rather than determining the path of economic growth, the choice of nominal anchor appears to be endogenously determined by the state of the economy. To peg or manage the exchange rate, a high level of international reserves is important, especially when a government's credibility is low after a period of high inflation. After controlling for the level of international reserves and the rate of inflation, growth after monetary-based stabilizations does not significantly differ from that following exchange rate-based stabilizations. ; Economic Research Working Paper 9914Inflation (Finance)

Can Mexico weather its next election cycle?

Mexico ; Economic development

Immigrant links to the home country: implications for trade, welfare and factor rewards

Human capital ; Emigration and immigration ; International trade

The saving grace

Many economists agree that a country's rate of saving can be a key factor in the growth rate and living standards the country achieves. Analysts are less certain about which factors have positive and negative influences on saving, what role government should have in creating a better environment for saving, and the extent to which a country can offset the effects of low domestic saving by tapping into other countries' savings. ; Economists, bankers, and officials discussed these and other aspects of saving earlier this year at a symposium sponsored by the Federal Reserve Bank of Dallas. Richard Alm and David Gould recap much of that discussion in this article.Money ; Saving and investment

GATT and the new protectionism

The Uruguay Round of the General Agreement on Tariffs and Trade (GATT) is the first agreement of its kind that reduces or eliminates tariffs on many goods and addresses issues related to intellectual property rights, trade in services and agricultural subsidies. With good reason, it has generated much optimism about the future of free world trade. ; But does GATT's trade liberalization today mean that trade will remain liberalized tomorrow? Increasingly, governments are counteracting the perceived unfair trade practices of other nations with their own trade barriers. While concerns about fairness are legitimate, raising trade barriers to counteract actual or perceived unfair trade practices of others is another form of protectionism that restricts world trade. This new protectionism has most often taken the form of antidumping and countervailing duties. ; Because the use of antidumping and countervailing duties has grown dramatically in recent years across many countries, David Gould and William Gruben analyze whether the recent changes to the GATT accord will discourage the most protectionist aspects of these widely used trade barriers. Gould and Gruben find that while the new GATT agreement does not eliminate the ability of such countries to misuse antidumping and countervailing duties, the accord delineates the rules of such duties much more clearly and provides mechanisms that will likely limit their abuse.International trade

Trade deficits: causes and consequences

According to conventional wisdom, trade balances reflect a country's competitive strength-the lower the trade deficit, the stronger the country's industries and the higher its rate of economic growth. In this article, David Gould and Roy Ruffin review the history of the conventional wisdom and empirically examine whether large overall trade deficits or bilateral trade imbalances are associated with lower rates of economic growth. They find that, once the fundamental determinants of growth have been accounted for, trade imbalances have little effect on rates of economic growth.Deficit financing ; Free trade