Maquiladora Employment Dynamics in Chihuahua City, Mexico

As exports from regions of developing economies to higher income economies grow, business cycle linkages between these areas also increase. This study applies a transfer function ARIMA methodology to the analysis of maquiladora sector employment in a non-border region of Mexico as a means for measuring its international business cycles linkages to the export market in the United States. Statistically significant payroll responses are found in response to variations in the exchange rate, domestic wage levels, foreign investment, and United States industrial production. Simulation testing is also completed as an additional means of model reliability verification. Because data requirements are not excessive, replication for other developing country markets is feasible.