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Trade liberalization, the income elasticity of demand for imports, and growth in Latin America

Listed author(s):
  • Penélope Pacheco López
  • A. P. Thirlwall

This paper applies the balance-of-payments-constrained growth model to 17 countries of Latin America over the period 1977-2002. The crucial parameter to estimate is the income elasticity of demand for imports, which is done for Latin America as a whole and for individual countries. As well as estimating over the whole period, the technique of rolling regressions is also used to test whether a trend increase can be discerned as a result of trade liberalization. A trend increase is found for Latin America as a whole and for some individual countries, and the balance-of-payments equilibrium growth rate is a good predictor of growth performance in nine of the 17 countries. There is no evidence that the balance-of-payments equilibrium growth rate has increased in Latin America as a result of trade liberalization.

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

Volume (Year): 29 (2006)
Issue (Month): 1 (October)
Pages: 41-61

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Handle: RePEc:mes:postke:v:29:y:2006:i:1:p:41-61
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