CC BY
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2. Tregub I.V. Econometrics. Model of real system// The Finance University under the Government of the Russian Federation. P.164
УДК 001.201
GrishinA.A.
Master student of International Finance Faculty Academic supervisor: Tregub I. V.
Associate Professor of the Department«System analysis and modeling of
economic processes»
Financial University under the government of the Russian Federation
Russia, Moscow
УДК 001.201
Гришин А.А. студент магистратуры Международный финансовый факультет
Трегуб И.В.
научный руководитель, профессор кафедра «Системный анализ и моделирование экономических
процессов»
Финансовый университет при правительстве РФ
Россия, г. Москва THE DUTCH DISEASE IN MEXICO AND ITS INFLUENCE ON GDP.
Abstract
This paper investigates what influence "Dutch disease" has on Mexican economy and how it effects GDP of the country. Prepared and analyzed model describes the situation that GDP of Mexico strongly depends on export of gold, unemployment and currency ratio between US$ and Mexican Peso.
Key words:
GDP, Econometric model, Export of gold, "Dutch disease", Economics, Unemployment, GDP.
ГОЛЛАНДСКАЯ БОЛЕЗНЬ В МЕКСИКЕ И ЕЕ ВЛИЯНИЕ НА
ВВП.
Аннотация:
Данная статья исследует, какое влияние "голландская болезнь" имеет на экономику Мексике и как она влияет на ВВП страны. Полученная и проанализированная модель описывает ситуацию, как ВВП Мексики сильно зависит от экспорта золота, безработица и соотношение валюты между USD$ и Мексиканского Песо.
Ключевые слова: ВВП, эконометрическая модель, экспорт золота, "голландская болезнь", экономика, курс USD$/Мексиканское Песо, безработица.
Summary
This work is dedicated to the analysis of economic model in Mexico.
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Statement of problem, key economic indicators of Mexico for the period since 2000 to 2015 are described. Data and model were analyzed in EViews program. Practical implementation of mathematical and computer modeling according to the real data describe how "Dutch disease" effects Mexican economy and its GDP. This research helps to understand how GDP depends on the macroeconomic indicators like export of gold, unemployment and relation between US$ and Mexican Peso, the one gets more information concerning the dependence of GDP other macroeconomic indicators, such as federal budget income, exports of gold and relation of USD/Mexican peso. These indicators in Mexico draw attention and important to analyze. Although not all the tests were passed with a merit, the model is really suitable for the chosen country.
Introduction
What is conventional Dutch disease? Dutch disease refers to unfortunate symptoms that may afflict a country in which one natural resource, usually oil, becomes dominant.
John Nash, and Augusto De la Torre stated that impact of natural resources in Latin America and especially and Mexico caused a serious boom is export of gold from Mexico. As the production of gold increased, the quantity for export increased too. That led to mistake in understanding in society that it will cause improvement in common wealth of the state.20An oil-exporting country may be tempted to live off its oil. Oil may make the exchange rate strong, so that other exports flag and imports are high.
The country develops a "rentier" society, living like a landlord off its chief asset. Other development, other means of generating wealth, are discouraged and neglected. But Mexico is gold-exporting country as well as oil-exporting, however recently Mexico has increased production of gold and its export increased to in comparison with oil.21 The employment level in Mexico remained low as the low skill level of workers could not be of use to the gold industry. Meanwhile, gold prices were rising and the Mexican infrastructure could do little to control the inflow of imports. Dutch Disease was in full effect and the citizens of Mexico were not seeing any increase in personal wealth.
In this paper we analyzed the economic model which describes how GDP during the "Dutch disease" is affected by export of gold, unemployment and exchange relation US$/Mexican Peso. There are 4 exogenous (independent) variables in the model: exports of crude gold, relation of USD$/Mexican Peso, total exports and total imports; and 2 endogenous (dependent) variables - GDP and export of gold. The specification of the model is the following: GDP = C(1) + C(2) * Export of gold + C(3) * Currency + C(4) * Unemployment Export of gold = C(5) + C(6) * GDP + C(7) * Total export + C(8) * Total import
Where GDP (index in base equivalent), Export of gold (millions of US$),
20 Sinnott, Emily, John Nash, and Augusto De la Torre. "Natural Resources in Latin America: Beyond Booms and Busts?", 2010
21 Farfan-Mares, Gabriel. "Non-Embedded Autonomy: The Political Economy of Mexico's Rentier State(1918-2010).", 2010
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X2 - exchange relation US$/Mexican Peso, X3 - Unemployment (millions of people), X4 - total exports (millions of US$), X5 - total imports (millions of US$).
According to calculations we obtain the following result: System: UNTITLED
Estimation Method: Two-Stage Least Squares
Date: 02/16/17 Time: 14:20
Sample: 2000 2015
Included observations: 16
Total system (balanced) observations 32
Coefficient Std. Error t-St atistic Prob.
C( 1) 105665.4 18623.63 5.673728 0. 0000
C(2) 8838.551 1625.139 5.438642 0.0000
C(3) -4773.349 2046.760 -2.332149 0.0284
C(4) -0.000852 0.006554 -0.130048 0.8976
C(5) -0.132648 2.024514 -0.065521 0.9483
C(6) -0.000103 5.71E-05 -1.811276 0.0826
C(7) 0.001127 0.000496 2.273197 0.0323
C(8) -0.000541 0.000484 -1.118993 0.2742
Determinant residual covariance 22282969
Equation: GDP=C(1) + C(2)*EXPORT_GOLD + C(3)*CURRENCY + C(4) *UNEMPLOYMENT Instruments: CURRENCY UNEMPLOYMENT TOTAL_EXPORT
TOTAL_IMPORT C
Observations: 16_
R-squared 0.871564 Mean dependent var 97610.31
Adjusted R-
squared 0.839455 S.D. dependent var 20907.94
S.E. of regression 8377.401 Sum squared resid 8.42E+08 Durbin-Watson stat 0.603524
Equation: EXPORT_GOLD=C(5) + C(6)*GDP + C(7)*TOTAL_EXPORT +
C(8)*TOTAL_IMPORT Instruments: CURRENCY UNEMPLOYMENT TOTAL_EXPORT
TOTAL_IMPORT C Observations: 16
R-squared 0.947366 Mean dependent var 5.638750
Adjusted R-
squared 0.934208 S.D. dependent var 3.189317
S.E. of regression 0.818059 Sum squared resid 8.030652
Durbin-Watson stat 1.004082
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Value of the multiple coefficient of determination R2 =0,87 shows that 87 % of total deviation of GDP is explained by the variation of export of gold, unemployment and exchange relation US$/Mexican Peso. Such a high value of the R2 is good, it is close to 1 (maximumR2 = 1). This means that selected factors influence the given model significantly.22
Conclusion
The lessons from Mexican crisis are clear; once poor economic decisions are made it can be extremely difficult to recover. Gold is such an important opportunity and to mismanage it to this extreme is extremely wasteful and dangerous. A second lesson is also clear; preventative measures are very useful where they exist. According to the solutions for crowding out the Mexican government could have used the revenue from gold to encourage investment and spur the economy immediately. Certainly such a measure would have a stronger positive long run result then paying for food subsidies.
However the real solution lies in creating value that is not solely based in gold. Once the oil runs out there is no more wealth than before unless the oil royalties have been used to create lasting value. If Mexico had used the revenue from gold to entice investment in the development of new industries or in education of the Mexican people some value would have been created. Instead the government only concerned itself with the situation at that moment. This sort of disregard for the government's role in the development of the economy is ironic given the centralized structure Mexico. Generally, a government that takes part in industry through ownership of a crown corporation does so to have better control over the economy.
After the analysis of the model in Mexico, for the period 2000-2015, the following conclusion takes place: this current model suits Mexico and can be applied to analyze GDP and how it is determined export of gold, unemployment and exchange relation US$/Mexican Peso during the "Dutch disease".
List of references:
1. Sinnott, Emily, John Nash, and Augusto De la Torre. "Natural Resources in Latin America: Beyond Booms and Busts?", 2010
2. Farfan-Mares, Gabriel. "Non-Embedded Autonomy: The Political Economy of Mexico's Rentier State(1918-2010).", 2010
3. I.V.Tregub. Mathematical models of economic systems dynamics: Monography. M.: Finance Academy, 2009. 120 p.
22 I.V.Tregub. Mathematical models of economic systems dynamics: Monography. M.: Finance Academy, 2009. 120 p.
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