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Prepared by Kornélia Krajnyák.
One-digit manufacturing industries according to the old industry classification. “Other” industries were dropped from the sample.
The construction of the FSI for emerging markets includes a somewhat different list of variables (banking sector beta, stock market returns and volatility, sovereign spreads, and an indicator capturing exchange rate and reserve developments). For Mexico, the index is available from 1997, and moves very closely with the U.S. FSI in the 1997–2007 period.
The U.S. sample includes a more detailed breakdown of manufacturing industries. Right-hand-side variables in the estimated equation are lagged GDP growth, lagged FSI, and industry constants.
Industry weights were calculated based on production weights for manufacturing industries as reported by INEGI in http://www.inegi.org.mx/prodserv/contenidos/espanol/biblioteca/Default.asp?accion=2&upc=702825001785& s=est&c=15696.
Indirect effects through U.S. growth may amplify the negative impact. The estimated coefficient for U.S. industries is virtually identical, but stronger dependence on external finance amplifies the average effect to 0.6 percent.
GDP growth and manufacturing growth co-moved strongly over the last decade, with a linear regression coefficient around 0.6.
The available capacity utilization series for Mexico is short, and is not conducive to deducing trends. The smoothed historical series are based on an HP-filter run on the available data.
For both the participation and the unemployment rate, the smoothed series are generated by HP-filtering.