Abstract

CASARES, Enrique R.; GARCIA-SALAZAR, María Guadalupe; PLATA-PEREZ, Leobardo  and  RAMOS-VARELA, José Manuel. External Debt and Economic Growth. A Calibration for Mexico. Rev. mex. econ. finanz [online]. 2023, vol.18, n.3, e486.  Epub May 13, 2024. ISSN 2448-6795.  https://doi.org/10.21919/remef.v18i3.486.

Objective: we apply Blanchard’s model (1983) to Mexico. We analyze the accumulation of external debt and its sustainability. Methodology: We calibrate the model for the year 2019. Using the time elimination method, we determine the stable arms of the model. Results: we present three simulations that promote production. First, an increase in productivity causes the Proportion of External Debt/GDP (PEDGDP) to rise to 26.9%. Second, a decrease in the population growth rate causes the PEDGDP to increase slightly. Third, a decrease in the International Interest Rate (IIR) produces a large increase in PEDGDP, to 44.01%, sustainable level. We show that PEDGDP is very sensitive to IIR, which can produce over-indebtedness. Recommendations: the sensitivity of PDPIB to the IIR puts us on notice to have prudent macroeconomic policies. Limitations: the households lack restrictions on international credit. Originality: This methodology has not been applied to Mexico. Conclusions: The economic cycles through which production and external debt of Mexico, pass go hand in hand with the variation of the IIR, over-indebtedness will always be present.

Keywords : Open Economy; Economic Growth; Current Account; External Debt.