The balance-of-payments constraint:from balanced trade to sustainable debt
This paper extends the balance-of-payments constraint on growth known as Thirlwall's law to incorporate unbalanced trade and debt accumulation. Assuming that small open economies face a liquidity constraint, the text shows the growth and real-exchange-rate policy rules consistent with a stable ratio of net exports to income. Given such rules, the text shows how the trade balance of a small open economy is residually determined by the ratio of foreign debt to income allowed by international conditions.
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- Anthony Philip Thirlwall, 1979.
"The Balance of Payments Constraint as an Explanation of International Growth Rate Differences,"
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- Juan Carlos Moreno-Brid, 1999. "On Capital Flows and the Balance-of-Payments-Constrained Growth Model," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(2), pages 283-298, January.
- Nelson H. Barbosa Filho, 2001. "International Liquidity and Growth in Brazil," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2001-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
- Alexander, R. & King, A., 1998. "Growth and the Balance-of-Payment Constraint," Department of Economics - Working Papers Series 622, The University of Melbourne.
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