Abstract

RODRIGUEZ BENAVIDES, Domingo  and  LOPEZ HERRERA, Francisco. Effects of oil prices uncertainty on Mexico’s economic growth. Inv. Econ [online]. 2019, vol.78, n.309, pp.80-106.  Epub May 20, 2020. ISSN 0185-1667.  https://doi.org/10.22201/fe.01851667p.2019.309.70120.

We inquire whether the uncertainty of international oil prices affected Mexico’s economic activity during 1983:2-2017:4. To measure such impact we use a bivariate structural vector autoregressive (VAR) model with a generalized autoregressive conditional heteroskedasticity (GARCH) in-mean process that captures the impact of oil price volatility on economic growth and gross fixed capital formation. Our results show that the said uncertainty has a negative influence on Mexico’s economic activity. Further, they reveal the presence of asymmetric effects, as the output growth rate increases (decreases) after a negative (positive) oil price shock. These results highlight the importance of adopting public policies aimed at mitigating the effects of oil market uncertainty and help stabilize economic activity.

Keywords : Oil price volatility; economic activity; multivariate VAR-GARCH in-mean; asymmetric effects; Mexico; E32; C32.

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