The balance-of-payments constraint:from balanced trade to sustainable debt
AbstractThis paper extends the balance-of-payments constraint on growth known as Thirlwall's law to incorporate unbalanced trade and debt accumulation. Assuming that small open economies face a liquidity constraint, the text shows the growth and real-exchange-rate policy rules consistent with a stable ratio of net exports to income. Given such rules, the text shows how the trade balance of a small open economy is residually determined by the ratio of foreign debt to income allowed by international conditions.
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Bibliographic InfoArticle provided by Banca Nazionale del Lavoro in its journal Banca Nazionale del Lavoro Quarterly Review.
Volume (Year): 54 (2001)
Issue (Month): 219 ()
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Find related papers by JEL classification:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
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- Terra, Maria Cristina T., 1999. "Finance and changing trade patterns in Brazil," Economics Working Papers (Ensaios Economicos da EPGE) 354, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Thirlwall, Anthony P & Hussain, Mohammed Nureldin, 1982. "The Balance of Payments Constraint, Capital Flows and Growth Rate Differences between Developing Countries," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 498-510, November.
- Alexander, R. & King, A., 1998. "Growth and the Balance-of-Payment Constraint," Department of Economics - Working Papers Series 622, The University of Melbourne.
- Gökçe, Atilla & Çankal, Erhan, 2013. "Balance-of-payments constrained growth model for the Turkish economy," Economic Modelling, Elsevier, vol. 35(C), pages 140-144.
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