Contradictions of the open economy model as applied in Mexico

This chapter presents a critique of the open economy model implemented in Mexico since 1987. The criticism presented here does not dwell on the deficient performance of the Mexican economy during the period in which this model was implemented; instead, it centers on the internal contradictions of the model that have prevented the policy mix applied in Mexico from delivering on its promises.2 The model we examine here is the Mundell-Fleming model, the widely cited standard for macroeconomic analysis of open economies; that model was one of the principal accomplishments that led to the award of the Nobel Prize for Economics to Robert Mundell in 1999.