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An Australian Contribution to International Trade Theory: The Dependent Economy Model

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  • Phillip Edmund Metaxas
  • Ernst Juerg Weber

Abstract

This paper details the origin and development of the dependent economy model. The model is also known as the ‘Australian model’ and the ‘Salter-Swan-Corden-Dornbusch model’, but neither title adequately conveys the scope and sequence of contributions that were instrumental to its development. In particular, attention is given to indispensable contributions made by renowned Australian public servant Sir Roland Wilson and British economist James Meade, which preceded those of Trevor Swan, Wilfred Salter, W. Max Corden and Rudiger Dornbusch. It is shown that Wilson and Meade laid much of the theoretical groundwork ahead of the contributions of Swan, Salter, Corden and Dornbusch. Each contribution is analysed in detail and the model’s development is placed in the broader context of the evolution of balance of payments theory. The paper sheds light on several underappreciated (or perhaps unknown) facets of the model and, principally, highlights a broader Australian contribution to international trade theory inherent in it, namely, the identification of the real exchange rate as the critical relative price in balance of payments adjustment.
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  • Phillip Edmund Metaxas & Ernst Juerg Weber, 2016. "An Australian Contribution to International Trade Theory: The Dependent Economy Model," The Economic Record, The Economic Society of Australia, vol. 92(298), pages 464-497, September.
  • Handle: RePEc:bla:ecorec:v:92:y:2016:i:298:p:464-497
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    2. Wood, richard, 2014. "Eurozone Macroeconomic Framework: Reducing Internal and External Imbalances," MPRA Paper 53569, University Library of Munich, Germany.
    3. Schmitt-Grohé, Stephanie & Uribe, Martín, 2021. "Reviving the Salter-Swan small open economy model," Journal of International Economics, Elsevier, vol. 130(C).
    4. Prema‐chandra Athukorala & Hal Hill & Sisira Jayasuriya, 2021. "Economist as public intellectual: Max Corden’s journey through life," The World Economy, Wiley Blackwell, vol. 44(6), pages 1472-1483, June.
    5. Xianglong Liu & Adrian R. Pagan & Tim Robinson, 2018. "Critically Assessing Estimated DSGE Models: A Case Study of a Multi‐sector Model," The Economic Record, The Economic Society of Australia, vol. 94(307), pages 349-371, December.
    6. Kenneth W Clements & Yihui Lan & Haiyan Liu & Long Vo, 2022. "The Icp, Ppp And Household Expenditure Patterns," Economics Discussion / Working Papers 22-18, The University of Western Australia, Department of Economics.

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