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Balance-of-payments-constrained growth in a multisectoral framework: A panel data investigation

Author

Listed:
  • Raphael Rocha Gouvêa
  • Gilberto Tadeu Lima

Abstract

Purpose - The aim of this paper is to contribute to the literature on balance-of-payments-constrained growth by providing an innovative empirical evaluation of a disaggregated version of the so-called Thirlwall's Law derived from a Pasinettian multisectoral framework. Design/methodology/approach - After estimating sectoral elasticities of exports and imports for a considerable panel dataset of 90 countries over the period 1965-1999, the authors have performed two empirical exercises. First, they grouped countries together by income level and evaluated a multisectoral balance-of-payments-constrained growth model by analyzing prediction errors and mean absolute deviations. Second, the authors carried out a regression validity test on the results. Findings - The main findings give support to the validity of the multisectoral version of Thirlwall's Law, providing therefore further understanding of the structural determinants of the uneven international development and guidance for the design of growth-enhancing national structural policies. Originality/value - The main value added of this contribution to the existing literature lies in the use of disaggregated trade data in conjunction with modern panel data econometric techniques to obtain empirical estimates on the balance-of-payments constraints to long-run economic growth for an unprecedently large sample of countries.

Suggested Citation

  • Raphael Rocha Gouvêa & Gilberto Tadeu Lima, 2013. "Balance-of-payments-constrained growth in a multisectoral framework: A panel data investigation," Journal of Economic Studies, Emerald Group Publishing, vol. 40(2), pages 240-254, May.
  • Handle: RePEc:eme:jespps:v:40:y:2013:i:2:p:240-254
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    References listed on IDEAS

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    1. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
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    10. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2007. "A structural economic dynamics approach to balance-of-payments-constrained growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(5), pages 755-774, September.
    11. J.S.L. McCombie & Mark Roberts, 2002. "The Role of the Balance of Payments in Economic Growth," Chapters,in: The Economics of Demand-Led Growth, chapter 6 Edward Elgar Publishing.
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    Cited by:

    1. repec:arh:jrujec:v:5:y:2019:i:1:p:1-26 is not listed on IDEAS
    2. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Distributive cycles and endogenous technical change in a BoPC growth model," Economic Modelling, Elsevier, vol. 77(C), pages 216-233.
    3. Marwil J. Dávila-Fernández, 2018. "Alternative Approaches to Technological Change when Growth is BoPC," Department of Economics University of Siena 795, Department of Economics, University of Siena.
    4. repec:rnd:arjsds:v:2:y:2011:i:2:p:81-88 is not listed on IDEAS
    5. repec:psl:pslqrr:2017:13 is not listed on IDEAS
    6. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
    7. Marwil J. Dávila-Fernández & Serena Sordi, 2018. "Path dependence, distributive cycles and export capacity in a BoPC growth model," Department of Economics University of Siena 785, Department of Economics, University of Siena.
    8. repec:nov:artigo:v:27:y:2017:i:1:p:7-34 is not listed on IDEAS
    9. Marwil J. Dávila-Fernández & Serena Sordi, 2018. "Attitudes Toward Climate Policies in a Macrodynamic Model of the Economy," Department of Economics University of Siena 784, Department of Economics, University of Siena.
    10. A. P. Thirlwall, 2013. "Economic Growth in an Open Developing Economy," Books, Edward Elgar Publishing, number 15208.
    11. repec:eee:streco:v:44:y:2018:i:c:p:77-87 is not listed on IDEAS

    More about this item

    Keywords

    Balance-of-payments constraint; Structural change; Multisectoral analysis; Economic growth; Economic development; Trade income elasticities;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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