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Why Thirlwall's law is not a tautology: more on the debate over the law

Author

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  • J.S.L. McCombie

    (University of Cambridge, UK)

Abstract

This paper reconsiders the argument first debated in the 1980s and revisited by Blecker (2016) and Razmi (2016), inter alios, that Thirlwall's law is nothing but a near-identity. It is shown theoretically and by simulation analysis that this proposition is erroneous. It is also demonstrated that Razmi's (2016) specification of the balance-of-payments-constrained growth model is problematical. The paper concludes by assessing the effectiveness of the rate of change of relative prices for export and import growth. Recent evidence provides further support for the importance of non-price competitiveness in international trade and, hence, for Thirlwall's law.

Suggested Citation

  • J.S.L. McCombie, 2019. "Why Thirlwall's law is not a tautology: more on the debate over the law," Review of Keynesian Economics, Edward Elgar Publishing, vol. 7(4), pages 429-443, October.
    • Handle: RePEc:elg:rokejn:v:7:y:2019:i:4:p429-443
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    Citations

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    Cited by:

    1. Sebastien Charles & Thomas Dallery & Jonathan Marie, 2022. "The slowing of growth in France: an interpretation based on Thirlwall’s law," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 45(1), pages 100-129, January.
    2. Guilherme R. Magacho & John S. L. McCombie, 2020. "Structural change and cumulative causation: A Kaldorian approach," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 633-660, July.
    3. Robert A. Blecker, 2022. "New advances and controversies in the framework of balance‐of‐payments‐constrained growth," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 429-467, April.

    More about this item

    Keywords

    Thirlwall's law; balance-of-payments-constrained growth; tautology; price and non-price competitiveness;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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