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

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  • ARSLAN RAZMI

Abstract

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.

Suggested Citation

  • Arslan Razmi, 2005. "Balance-of-payments-constrained growth model: the case of India," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 27(4), pages 655-687.
    • Handle: RePEc:mes:postke:v:27:y:2005:i:4:p:655-687
    DOI: 10.1080/01603477.2005.11051457
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