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 InfoPaper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA Working Papers with number 2001-06.
Length: 25 pages
Date of creation: Jan 2002
Date of revision:
balance of payments constraint; trade; debt; growth;
Find related papers by JEL classification:
- F30 - International Economics - - International Finance - - - General
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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- Raphael Rocha Gouvêa & Gilberto Tadeu Lima, 2011.
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- Elias Soukiazis & Pedro Cerqueira & Micaela Antunes, 2012. "Causes of the Decline of Economic Growth in Italy and the Responsibility of EURO. A Balance-of-Payments Approach," GEMF Working Papers 2012-03, GEMF - Faculdade de Economia, Universidade de Coimbra.
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