The aim of this study is to empirically test the validity of Thirlwall’s Law in China during the reform period of 1979-2002. For the income elasticity of import demand, an aggregate import demand function for the Chinese economy is estimated using ARDL-UECM model and the bounds test. This study finds (1) that for 1979-2002, the Chinese economy has grown on average as fast as Thirlwall’s Law predicts, the average actual growth rate and predicted growth rate were, respectively, 9.25 and 8.55, which are statistically identical; (2) that the growth of GDP and of exports are cointegrated. Both (1) and (2) provide strong support for Thirlwall’s Law in China during the reform period after 1978. The supportive result of Thirlwall’s Law implies the relevance of demand-side approach to economic growth in China.
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Find related papers by JEL classification: F14 - International Economics - - Trade - - - Country and Industry Studies of Trade F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
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