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Balance of Payments Constrained Growth Model: The Case of India

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  • Arslan Razmi

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    (University of Massachusetts Amherst)

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    Abstract

    This study applies the Balance of Payments Constrained Growth (BPCG) model to India, a large developing country with a relatively low trade to GDP ratio. Rather than assuming similar elasticities of substitution between goods produced in different regions, the study extends the model to relax these assumptions. Johansen’s cointegration technique is employed to estimate trade parameters. Short-run adjustments are explored within a vector error correction framework. The average growth rates predicted by various forms of the BPCG hypothesis are found to be close to the actual average growth rate over the period 1950-1999, although individual decades display substantial deviations. JEL Categories: F43, F14, E12

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    Bibliographic Info

    Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2005-05.

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    Date of creation: Feb 2005
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    Handle: RePEc:ums:papers:2005-05

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    Keywords: Balance of payments-related constraints; real exchange rates; Johansen’s cointegration technique; strong form; weak form; trade multiplier; import compression.;

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    Cited by:
    1. Halicioglu, Ferda, 2012. "Balance-of-Payments Constrained Growth: the Case of Turkey," MPRA Paper 41791, University Library of Munich, Germany.
    2. Robert A. Blecker & Carlos A. Ibarra, 2013. "Trade liberalization and the balance of payments constraint with intermediate imports: the case of Mexico revisited," Working Papers 2013-02, American University, Department of Economics.
    3. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
    4. Gökçe, Atilla & Çankal, Erhan, 2013. "Balance-of-payments constrained growth model for the Turkish economy," Economic Modelling, Elsevier, vol. 35(C), pages 140-144.
    5. Robert Blecker, 2014. "Structural Change, the Real Exchange Rate, and the Balance of Payments in Mexico, 1960-2012," Working Papers 2014-01, American University, Department of Economics.
    6. Theodore Panagiotidis & Mark J. Holmes & Abhijit Sharma, 2007. "The Sustainability of India's current account (1950-2003): Evidence from parametric and non-parametric unit root and cointegration tests," Working Paper Series 41-07, The Rimini Centre for Economic Analysis, revised Jul 2007.

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