Dating the Mexican Business Cycles Since 1980 by Disentangling the Monthly Economic Activity

This study identifies the peaks and troughs of Mexico’s economy from 1980 to 2022 using disaggregated sectoral data of monthly economic activity. We model the three dimensions of an economic recession-diffusion, duration, and depth-by applying a non-stationary dynamic factor model to 14 subsectors of the Global Indicator of Economic Activity. We retropolated the time series, available from 1993 to 1980, using the method proposed by Guerrero (J Offic Stat 19(3):215, 2003). We determine recession duration and depth based on Bry and Boschan (Programmed Selection of Cyclical Turning Points, 1971) criterion applied to the non-stationary dynamic factor. We then compare the results with the Mexican National Institute of Statistics and Geography (INEGI) coincident indicator, the Business Cycle Dating Committee of Mexico, and a dynamic factor estimated using the INEGI coincident time series. Our main conclusion is that the proposed approach generates dates similar to those identified by the Business Cycle Dating Committee while offering the advantage of satisfying econometric standards and addressing the diffusion criterion, which many studies often overlook.