Contents

From the Editor

Michael Woodford — The Fed’s New Communication Strategy: Is It Stealth Inflation Targeting?

John Silvia — Subprime Credit: The Evolution of a Market

Ana Aizcorbe, Stephen D. Oliner, and Daniel E. Sichel — Shifting Trends in Semiconductor Prices and the Pace of Technological Progress

Fernando Sedano — Economic Implications of Mexico’s Sudden Demographic Transition

Orges Ormanidhi and Omer Stringa — Porter’s Model of Generic Competitive Strategies

George Chressanthis — Pharmaceutical Economics

Robert P. Parker — Detailed Industry, Product, Geographic Data from the 2007 Economic Census Become Available in 2009

Book Reviews

Economic Implications of Mexico’s Sudden Demographic Transition

The Next 20 Years Offer Particular Risks And Opportunities

By Fernando Sedano

Fernando Sedano is manager of operations and investor services at Argentina’s National Investment Development Agency, ProsperAr. Prior to joining ProsperAr in 2007, Dr. Sedano was economist and council director at the Manufacturers Alliance/MAPI, where he was in charge of economic research focusing on Latin America and where he managed the Supply Chain Logistics Council. At the Alliance, he wrote extensively on macroeconomic and structural issues affecting Mexico, Brazil, and Argentina. Dr. Sedano was adjoint professor at Auburn University and Auburn University-Montgomery, where he taught macroeconomics, microeconomics, and statistics. He was also a research specialist at the Center for Business and Economic Development of Auburn University- Montgomery. He received a Ph.D. in applied economics with a specialization in international economics at Auburn University and an M.S. in economics from the same institution. He also earned an M.B.A. from Auburn University- Montgomery.

Mexico is in the midst of an unprecedented demographic transition that is changing the size and age structure of its population. The most salient demographic change—and clearly the precursor of most other demographic changes—is the abrupt decline in the country’s fertility rate from 6.5 in the early 1970s to the current 2.2 mark, one of the fastest declines in the world. This dramatic reduction of fertility rates has created a “boom generation” that is currently in its prime working years and that will gradually age and retire. As Mexico experiences sub-replacement fertility rates over the next decades, old-age dependency ratios will escalate to unprecedented levels, carrying significant economic implications, both in Mexico and in the United States. After reviewing the economic literature on the link between demographics and economics, this paper attempts to shed some light on the relationship between Mexico’s demographic patterns and economic development since 1950, offering possible explanations for the apparent lack of an expected connection. The paper then discusses the implications of Mexico’s demographic projections on both sides of the border.

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