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Federal Reserve Bank of Dallas
Working Papers
Business cycle coordination along the Texas-Mexico border
Keith R. Phillips
Jesus Canas
Abstract

In this paper we use a dynamic single-factor model originally due to Stock and Watson [18, 19] to measure the business cycle in four Texas border Metropolitan Statistical Areas (MSAs) and Mexico. We then measure the degree of economic integration between border cities, the US, Texas, and Mexican economies using correlation, spectral and cluster analysis. Results suggest border MSAs are significantly integrated with the broader economies and that major changes have occurred in these relationships since 1994, the year in which NAFTA was enacted and the time maquiladora industry began to accelerate.


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Keith R. Phillips & Jesus Canas, Business cycle coordination along the Texas-Mexico border, Federal Reserve Bank of Dallas, Working Papers 0502, 2004.
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Keywords: North American Free Trade Agreement ; Maquiladora
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