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A Reassessment Of Balance Of Payments Constrained Growth: Results From Panel Unit Root And Panel Cointegration Tests

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  • Dimitris Christopoulos
  • EFthymios Tsionas

Abstract

The paper reassesses the empirical evidence for Thirlwall's law in seven industrial countries by using panel unit root and panel cointegration tests including Johansen maximum likelihood cointegration tests. Current practice restricts attention to time series residual based cointegration tests, which are known to have low power and are subject to normalization problems. Since economic time series are typically short, it is desirable to exploit panel data in order to draw sharper inferences. The empirical results reveal that imports are cointegrated with terms of trade and income (although residual-based tests indicate the opposite). We find that, with the exception of Australia, Thirlwall's law holds. [C22, C23, O40, O57]

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 17 (2003)
Issue (Month): 3 ()
Pages: 39-54

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Handle: RePEc:taf:intecj:v:17:y:2003:i:3:p:39-54

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  2. José A. Alonso & Carlos Garcimartín, 1999. "A New Approach to Balance-of-Payments Constraint: Some Empirical Evidence," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(2), pages 259-282, January.
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  4. John S. L. McCombie, 1997. "On the Empirics of Balance-of-Payments-Constrained Growth," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 19(3), pages 345-375, April.
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  8. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
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  14. Hubert Hieke, 1997. "Balance-of-Payments-Constrained Growth: A Reconsideration of the Evidence for the U.S. Economy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 19(3), pages 313-325, April.
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Cited by:
  1. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2007. "A structural economic dynamics approach to balance-of-payments-constrained growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(5), pages 755-774, September.
  2. Gouvea, Raphael Rocha & Lima, Gilberto Tadeu, 2011. "Balance-of-payments-constrained growth in a multisectoral framework: a panel data investigation," MPRA Paper 29816, University Library of Munich, Germany.
  3. Irene Fafaliou & Michael Polemis, 2013. "Competitiveness of the Euro Zone Manufacturing: A Panel Data Analysis," International Advances in Economic Research, Springer, vol. 19(1), pages 45-61, February.
  4. Maja Kadievska-Vojnovic & Danica Unevska, 2007. "Price and Income Elasticities of Export and Import and Economic Growth in the case of the Republic of Macedonia," Working Papers 2007-01, National Bank of the Republic of Macedonia.
  5. Polemis, Michail & Fotis, Panagiotis, 2011. "The gasoline Industry in European Union and the USA," MPRA Paper 35097, University Library of Munich, Germany.
  6. Polemis, Michael L. & Fotis, Panagiotis N., 2013. "Do gasoline prices respond asymmetrically in the euro zone area? Evidence from cointegrated panel data analysis," Energy Policy, Elsevier, vol. 56(C), pages 425-433.

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