Balance of Payments, Stability and Growth in México 1979-2005

This paper presents an extended model that includes Thirlwall's simple rule. Growth in Mexico fell from an annual average of 6,76% in 1961-1981 to 2,95% in the 1982-2004 period. Net flows of capital, rents and transfers promote and stabilize the economy, while devaluation does not improve growth. Income growth rates and income elasticities between Mexico and the United States have matched, which prevents convergence of per capita income. Mexico must design and implement an industrial policy if it wants to increase rate of growth and face the fall of oil reserves and the changes in the US migratory policies