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Demand-led versus supply-led growth transitions

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  • Kevin S. 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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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

Volume (Year): 34 (2012)
Issue (Month): 4 (July)
Pages: 713-748

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Handle: RePEc:mes:postke:v:34:y:2012:i:4:p:713-748

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

Related research

Keywords: demand-led growth; India; saving/investment causality; supply-led growth;

References

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  1. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers 12023, National Bureau of Economic Research, Inc.
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  12. Miguel A. León-Ledesma & A. P. Thirlwall, 1998. "The Endogeneity of the Natural Rate of Growth," Studies in Economics, Department of Economics, University of Kent 9821, Department of Economics, University of Kent.
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Cited by:
  1. Kevin S. Nell, 2013. "A Total Factor Productivity-Capital Accumulation Hypothesis of India’s Growth Transitions," CEF.UP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 1313, Universidade do Porto, Faculdade de Economia do Porto.

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