I chose Mexico as my country to track in the "Global Economy Project" because it is a neighbor of the United States and has gained a fairly important relationship with us, especially in regard to trade. Dr. Yardem"s Global Economy website was the starting point for this tracking project, but I already had it in my mind that I wanted to track either Canada or Mexico. Mexico was my choice simply because I have had the chance to spend some time there in the last two years and know that it is in a completely different situation than the United States. On Yardeni's website, I printed out the GDP chart, the four GDP expenditure charts, and three indicator charts. The three most appealing indicator charts were the unemployment rate, industrial production, and 3-month treasury bill which gave the best idea of inflation. I then reviewed these charts more closely and was able to make some speculation as to how Mexico's economy had cycled in the last twenty years.

After reviewing the charts, two periods that stood out most were those from the end of 1985 to mid 1987, and from the beginning of 1994 to early 1996. The Real GDP in Mexico was at about 2.1% at the end of 1985, and would prove to fall to -5% by the middle of 1986. Real private consumption had been falling since the middle of 1985 (from above 2% to around -4.2% in 1987), which most likely had a fairly high impact on the GDP because consumption makes up approximately two-thirds of the overall GDP. Decreased consumption usually comes with either a decrease income, or an overall decrease in unemployment. It is common knowledge that if one has less money, they will be forced to spend less. The unemployment rate had been rising in the last few months of 1985, finally reaching 4.3% in early 1986, which led the people of Mexico to decrease their consumption. Income is the most important factor in consumption, and the positive relationship between the two is apparent in the charts. Industrial production is another factor that will be affected by the other elements of the economy and will, in turn affect these other aspects. Following the drop in private consumption, and rise in unemployment, industrial production hit a trough of -9% in the end of 1986.

The middle of 1986 brought with it a couple months period in which there was a rise in the Mexican peoples hopes of getting out of this slowing in economy. A slight slowing in the decrease of capital spending at around -7% brought with it a decrease a little over 1% in the unemployment rate. With this small purchase of things such as land, plant, and equipment, the economy was stimulated for a few months period, helping to increase exports by just under 15%. This might not seem like a large amount, but it helped raise the GDP by 2.8% but more importantly gave the people of Mexico hope. After these two months though, the economy of Mexico hit the previously mentioned trough of -9%. By 1987 the economy had taken an upturn with increasing real GDP brought on by the bettering off all factors previously mentioned that are included in the GDP.

The period from the beginning of 1994 to early 1996 shows a greater decrease in the economy of Mexico, and can be considered closer to a depression than the previous period. The fore mentioned period of recession lacked both depth and duration, but hopefully prepared the people of Mexico for what was to come in 1994. A very dramatic 14% decrease in Real GDP took place throughout the first half of 1995, following a tease of a decline in economy 'in early 1994. An almost mirror image between the charts of real GDP, real private consumption, and real capital spending shows a very positive relationship between the three. One can literally hold them up to the light (one under the other) and see the similarity. As real private consumption dropped 18% and real capital spending dropped 45%, the real GDP was taken with it because these are two major factors that determine the GDP. Imports, which depend on the people's income affecting their consumption, dropped around 40% while exports grew a small amount in an attempt to stimulate some growth. Unfortunately, exports are generally a very small part of a countries overall GDP, and really do not affect it very much either positively or negatively. The unemployment rate obviously soared during this time in Mexico. From mid 1995 to around January of 1996, the rate went from about 3.5% to 7.5%, an increase of 4%. Within a few months period, many people lost their jobs and people realized the situation they were in now was more severe then ten years before. The interest rate did not increase as much as it did during the previous recession. It got to around 75% whereas in 1987, it had hit 155%. The trough finally hit in mid 1995 before a few month period of steady increase in real GDP. The reason for the overall increase in economy cannot be pinpointed as much as the reasons for the recessions. From the charts, it can be said that every aspect that makes up the real GDP made a turnaround in the middle of 1995, and took the real GDP to above 7% by the end of 1996.

The aspects of the Keynesian Expenditure Approach have become an accepted method of tracking the real GDP of any country. The eight charts used in this tracking project told a lot about the economy of Mexico. It can be learned that there are both "good" times and "bad" times in the business cycle and one must realize that even in times of prosperity there may be downfalls to come.

* Coach's italics, bold type, and underlining.