Citation:
[Journal:] Investigación Económica [ISSN:] 2594-2360 [Volume:] 78 [Issue:] 309 [Publisher:] Universidad Nacional Autónoma de México (UNAM), Faculdad de Economía [Place:] Ciudad de México [Year:] 2019 [Pages:] 80-106
Abstract (Translated):
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.