Determinants of Growth in Mexico and Brazil Between 2003 and 2018: A Demand-led Decomposition of Growth Using Input-output Tables

Abstract

ABSTRACT The main objective of this work is to carry out a demand-led growth decomposition for Brazil and Mexico so as to identify the main growth drivers and how the import structure has affected Brazilian and Mexican GDP growth between 2003 and 2018. We use the attribution (Dutch) method because it explains the contribution of each final demand component considering the import structure of intermediate and final goods and services required by each final demand component. The database used the national Input-Output Tables (IOTs) for both countries. We find that compared to the net-exports method, the external sector's contribution is underestimated for both countries, while the domestic contribution is overestimated. Furthermore, regarding the attribution method, the external sector is more important for Mexico than for Brazil, not because of its size in the final demand, but because it was the component that grew the most in the period. For Brazil, the domestic sector was the most crucial determinant of growth, especially household consumption.