On the other hand, the Mexican economy in the last 70 years has generally gone through at least two major stages. The first was in the 50’s, 60’s and part of the 70’s. It was characterized by economic growth and development with macroeconomic instability. Economic growth exceeded 5% per year and the inflation rate exceeded double digits.
The second stage was at the beginning of the 80’s, the Mexican economy began the path of macroeconomic stability with economic stagnation. It has also been characterized by secular economic growth, due to low annual growth that has been less than 2% since the 1980s.
The phenomenon of stagflation is a misused concept today, at least for the Mexican case.
For stagflation to exist, the combination of two economic variables is required, the first is economic stagnation and the second is the increase in prices above the central bank’s target, that is, high inflation.
Currently in Mexico there is high inflation with economic stagnation. Can it be called stagflation?
The answer to such a question in my opinion is a resounding NO.
In Mexico there has not been a period of sustained economic growth. Since Vicente Fox, economic growth has not exceeded 3% per year in a sustained manner. Although there are years where growth has been higher than 3% per year, it is for reasons unrelated to an economic policy that impacts economic growth.
In order for stagflation to exist, a prolonged period of economic growth is previously necessary. Has Mexico had a prolonged period of economic growth? At least since the year 2000, we can affirm that no. Why would there be economic growth without an economic policy that affects the increase in GDP?
Before asking if there is stagflation, it is more important to ask why there is no economic growth. What have the governments in turn done to positively impact the increase in GDP?