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Inconsistency and over-determination in balance-of-payments-constrained growth models: a note

Author

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  • José Luis Oreiro

    (Associate Professor, Instituto de Economia, Universidade Federal do Rio de Janeiro, Brazil)

Abstract

The objective of this short note is to re-evaluate the solution given by Palley (2002) for the inconsistency problem in BoP-constrained growth models. I show that once we distinguish the concepts of natural and warranted rates of growth that over-determination problem appears again, requiring the introduction of the level of real exchange rate in the formal structure of BoP models in order to be solved.

Suggested Citation

  • José Luis Oreiro, 2016. "Inconsistency and over-determination in balance-of-payments-constrained growth models: a note," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(2), pages 193-200, April.
  • Handle: RePEc:elg:rokejn:v:4:y:2016:i:2:p193-200
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    Citations

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    Cited by:

    1. Thomas H. W. Ziesemer, 2023. "Semi-endogenous growth in a non-Walrasian DSEM for Brazil: estimation and simulation of changes in foreign income, human capital, R&D, and terms of trade," Economic Change and Restructuring, Springer, vol. 56(2), pages 1147-1183, April.
    2. Marwil J. Dávila-Fernández & José L. Oreiro & Mario W. D. Dávila, 2018. "Endogenizing Non-Price Competitiveness In A Model With Capital Accumulation And Bopc On Growth," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 83, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    3. Valeriy V. Mironov & Liudmila D. Konovalova, 2019. "Structural changes and economic growth in the world economy and Russia," Russian Journal of Economics, ARPHA Platform, vol. 5(1), pages 1-26, April.
    4. Marwil J. Dávila-Fernández & Serena Sordi, 2021. "Thirlwall's law: Binding-constraint or centre-of-gravity? A possible Kaleckian solution," Department of Economics University of Siena 853, Department of Economics, University of Siena.
    5. Gabriel Porcile & Danilo Sartorello Spinola, 2018. "Natural, Effective and BOP-Constrained Rates of Growth: Adjustment Mechanisms and Closure Equations," PSL Quarterly Review, Economia civile, vol. 71(285), pages 139-160.
    6. Ziesemer, Thomas, 2022. "Linking the BOPC growth model with foreign debt dynamics to the goods and labour markets," MERIT Working Papers 2022-029, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Dávila-Fernández, Marwil J. & Oreiro, José L. & Dávila Dávila, Mario W., 2018. "Endogenizing non-price competitiveness in a BoPC growth model with capital accumulation," Structural Change and Economic Dynamics, Elsevier, vol. 44(C), pages 77-87.
    8. João Alcobia & Ricardo Cabral, 2023. "The Dutch disease of the Euro Area peripheral member states," Working Papers REM 2023/0257, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

    More about this item

    Keywords

    demand-led growth models; real exchange rate; Thomas Palley;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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