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Demand-led versus supply-led growth transitions

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  • Kevin Nell

Abstract

This paper develops a saving/investment causality hypothesis to distinguish between demand- and supply-led growth transitions. The empirical application shows that India's growth transition in 1980 entailed a shift out of a suboptimal demand regime (1953-78) into an optimal demand regime (1980-2007). A key insight from the causality results is that the fiscal expansion of the 1980s initiated demand growth at the natural rate, while faster export growth in the post-1990 liberalization period relaxed the open economy solvency constraint on demand and played a crucial role in sustaining demand growth at its maximum potential rate.

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  • Kevin Nell, 2012. "Demand-led versus supply-led growth transitions," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 34(4), pages 713-748.
    • Handle: RePEc:mes:postke:v:34:y:2012:i:4:p:713-748
    DOI: 10.2753/PKE0160-3477340406
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    1. Kevin S. Nell, 2015. "The Complementary Nature Between Technological Progress and Capital Accumulation in India's Long-Run Growth Transitions," Metroeconomica, Wiley Blackwell, vol. 66(4), pages 565-605, November.
    2. Kevin S. Nell, 2013. "A Total Factor Productivity-Capital Accumulation Hypothesis of India’s Growth Transitions," CEF.UP Working Papers 1313, Universidade do Porto, Faculdade de Economia do Porto.

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