potential gdp and the nairu of mexico are estimated using a cobb-douglas production function combined with a kalman filter, under the assumption of three different behaviors of total factor productivity. a growth accounting exercise is carried out to identify the factor contribution of labor and capital. results show that during 2006-2007 potential growth of mexico was between 3.7 and 4.3 per cent. the economic cycles experienced in mexico are characterized, and its recessions and expansions are dated. during 1980-2007 economic recessions and expansions lasted on average 7.0 and 13.3 quarters, respectively; that means recessions in mexico are 121.1 per cent longer than in the us, while expansions are 46.8 per cent shorter. as a consequence of economic recessions, mexico lost 16.1 per cent of its gdp and more than 1.2 million workers were fired.