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Balance-of-payments-constrained growth model: the case of India

  • ARSLAN RAZMI
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    This study applies the balance-of-payments-constrained growth (BPCG) model to India, a large developing country with a relatively low trade to gross domestic product ratio. Rather than assuming similar elasticities of substitution between goods produced in different regions, the study extends the model to relax these assumptions. Johansen's cointegration technique is employed to estimate trade parameters. Short-run adjustments are explored within a vector error correction framework. The average growth rates predicted by various forms of the BPCG hypothesis are found to be close to the actual average growth rate over the 1950-99 period, although individual decades display substantial deviations.

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    Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

    Volume (Year): 27 (2005)
    Issue (Month): 4 (July)
    Pages: 655-687

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    Handle: RePEc:mes:postke:v:27:y:2005:i:4:p:655-687
    Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

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    1. Dilip Dutta & Nasiruddin Ahmed, 2004. "An aggregate import demand function for India: a cointegration analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 11(10), pages 607-613.
    2. Luis B�Rtola & Hermes Higachi & Gabriel Porcile, 2002. "Balance-of-payments-constrained growth in Brazil: a test of Thirlwall's Law, 1890-1973," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 25(1), pages 123-140, January.
    3. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May.
    4. Abdelhak Senhadji, 1998. "Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 236-268, June.
    5. Antonio Spilimbergo & Athanasios Vamvakidis, 2000. "Real Effective Exchange Rate and the Constant Elasticity of Substitution Assumption," IMF Working Papers 00/128, International Monetary Fund.
    6. Rittenberg, Libby, 1986. "Export growth performance of less-developed countries," Journal of Development Economics, Elsevier, vol. 24(1), pages 167-177, November.
    7. John S. L. McCombie, 1997. "On the Empirics of Balance-of-Payments-Constrained Growth," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 19(3), pages 345-375, April.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. M. Ansari & N. Hashemzadeh & Y. Xi, 2000. "The Chronicle of Economic Growth in Southeast Asian Countries: Does Thirlwall's Law Provide an Adequate Explanation?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 22(4), pages 573-588, July.
    10. Muscatelli, V. A. & Stevenson, A. A. & Montagna, C., 1994. "Intra-NIE competition in exports of manufactures," Journal of International Economics, Elsevier, vol. 37(1-2), pages 29-47, August.
    11. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    12. Thirlwall, Anthony P & Hussain, Mohammed Nureldin, 1982. "The Balance of Payments Constraint, Capital Flows and Growth Rate Differences between Developing Countries," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 498-510, November.
    13. José A. Alonso & Carlos Garcimartín, 1999. "A New Approach to Balance-of-Payments Constraint: Some Empirical Evidence," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(2), pages 259-282, January.
    14. Jonathan Perraton, 2003. "Balance of Payments Constrained Growth and Developing Countries: An examination of Thirlwall's hypothesis," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 1-22.
    15. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
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