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Contribution to Book
The Mexican Economy in the 1990s: Boom or Bust?
Economic Transformation In Emerging Countries: The Role of Investment, Trade and Finance (1998)
  • Robert C. Shelburne, United Nations Economic Commission for Europe
Abstract
This chapter discusses the Mexican economy before and after the creation of NAFTA with an emphasis on how its macro-economy and its trade accounts, especially the structure of U.S.-Mexican trade, responded to both the implementation of NAFTA and the currency collapse that followed. In anticipation of NAFTA, the Mexican economy attracted significant capital inflows and returned to economic growth after years of stagnation. During the first year after implementation in 1994, bilateral trade between Mexico and the United States increased significantly. At the end of 1994, Mexico experienced an exchange rate crisis due to massive capital outflows; as a result, the peso depreciated by 40 percent and a serious recession followed. Mexican imports collapsed while their exports increased dramatically. This currency crisis was due to speculative capital flows and a risky economic strategy by the Mexican government in the years prior to the crisis. Also, once non-economic developments altered investor sentiments, the government failed to react appropriately. Mexico's recovery from crisis and future prospects are discussed.
Keywords
  • Mexico,
  • NAFTA,
  • Tequila Crisis,
  • U.S. Mexico Trade
Disciplines
Publication Date
August, 1998
Editor
Farok J. Contractor
Publisher
Elsevier Science
ISBN
ISBN-13:9780080434292
Citation Information
Robert C. Shelburne. "The Mexican Economy in the 1990s: Boom or Bust?" Oxford, UKEconomic Transformation In Emerging Countries: The Role of Investment, Trade and Finance (1998)
Available at: http://works.bepress.com/robert_shelburne/16/