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Thirlwall's law and the two-gap model: toward a unified "dynamic gap" model

Author

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  • Mario García-Molina
  • Jeanne Kelly Ruíz-Tavera

Abstract

This paper puts forward a unified model of two of the most relevant demand-based explanations of economic growthâThirlwall's law and the two-gap model. Under certain specifications, it is shown that Thirlwall's law extended with capital flows is equivalent to the "external gap." Our unified model, expressed in growth rates, is particularly useful to explain short-term growth in developing countries. Relevant policy implications are also drawn from the results.

Suggested Citation

  • Mario García-Molina & Jeanne Kelly Ruíz-Tavera, 2009. "Thirlwall's law and the two-gap model: toward a unified "dynamic gap" model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(2), pages 269-290, December.
    • Handle: RePEc:mes:postke:v:32:y:2009:i:2:p:269-290
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    Cited by:

    1. Anthony Philip Thirlwall, 2012. "Balance of Payments Constrained Growth Models: History and Overview," Palgrave Macmillan Books, in: Elias Soukiazis & Pedro A. Cerqueira (ed.), Models of Balance of Payments Constrained Growth, chapter 1, pages 11-49, Palgrave Macmillan.
    2. Worrell, DeLisle & Lowe, Shane & Naitram, Simon, 2012. "Growth Forecasts for Foreign Exchange Constrained Economies," MPRA Paper 52169, University Library of Munich, Germany.

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