Balance of payments and economic growth constrained.: A comparation between Argentine and Mexico

Mexican and Argentine economic growth have shown common features in the last five decades. On one hand, both countries have shown a rapid economic growth before debt crises in the eighties; after those years, growth rate dropped and intense crises occurred (Mexico 1994-95 and Argentine 2002). On the other hand, both economies have shown very different international patterns of specialization but both face up similar balance of payments restrictions on growth. The aim of this paper is to compare the economic growth dynamic in Mexico and Argentine in the 1968-2003 period. In so doing, we use the balance of payments constraint model, labelled Thirlwall's Law. We demonstrate the existence of a long-run relationship among economic growth, exports and terms of trade in the Mexican economy. We compare these estimations with those for Argentine economy adressed by Fugarolas and Matesanz (2007). Our results show that the balance of payments constrained model is useful to explain the dynamics of economic growth and the recent crises in both countries.