Affiliations: [a] Department of Economics, University of Pennsylvania,
Philadelphia, PA 19104, USA | [b] Department of Economics, Temple University,
Philadelphia, PA 19122, USA
Abstract: In a two-part paper, we apply to the Mexican economy the methodology of
forecasting at mixed frequencies developed by Klein and Kushnirsky [23]. We
construct two macroeconometric models for Mexico – high frequency, with monthly
observations, and low frequency, with annual observations. For each model we
provide a description of the data, their sources, and methods of computation.
The equations of the high frequency model follow the stages of the calculation
of Mexico's GDP using two parallel approaches, output and expenditure, and
averaging the results. The equations of the low frequency model are grouped into
three blocks: production, consumption, and investment; foreign direct investment
and trade; and wages, prices, and finance. Our methodology demonstrates how the
high frequency model can be used for periodic adjustments of selected key
indicators in the low frequency model, especially fixing initial conditions for
the dynamics of the low frequency model so that it may be extrapolated a few
years into the future. The methodology includes a theoretical foundation,
methods for the adjustment of model structures and properties, procedures for
achieving mutually consistent solutions, and step-by-step applications.
