Industry trade between Canada and Mexico: Will a weakening peso help Mexican manufacturing in the long run?

Mohsen Bahmani-Oskooee, Marzi Bolhassani, Scott W. Hegerty

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

Mexico has longed served as one of Canada's major trade partner, but the plunging peso has had drastic effects across North America. This study investigates the bilateral trade relationship between Canada and Mexico for 27 individual industries, from 1973 to 2006. Cointegration analysis shows that overall sensitivity to the real exchange rate is weak, but that the trade balances of certain manufacturing industries do indeed improve after a currency depreciation. The " J-curve" effect is present for certain electrical and mechanical industries, suggesting that the recent decline of the peso may currently be having a negative impact on Mexican trade-but that it might eventually be beneficial, particularly for the Machinery and Transport Equipment sector.

Original languageEnglish (US)
Pages (from-to)89-101
Number of pages13
JournalNorth American Journal of Economics and Finance
Volume22
Issue number2
DOIs
StatePublished - Aug 1 2011

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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