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On the dynamics of balance of payments constrained growth

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  • H. Sonmez Atesoglu
  • Donald Dutkowsky

Abstract

This paper assesses the dynamic behaviour of policies for resolving trade deficits. We extend the Thirlwall-based model by introducing an equation for setting current account policy. Steady-state solutions implying current account equilibrium emerge under autonomous spending contraction, exchange rate develuation, export expansion, and import reduction. Stability holds with plausible restrictions. simulations based upon the United States reveal that autonomous spending, import, and export policies behave similarly in correcting trade deficits. Exchange rate devaluation generates considerably slower adjustment. Corresponding output growth paths are also examined. The study formally incorporates dynamics into the Thirlwall approach for analysing balance of paymnets constrained growth.

Suggested Citation

  • H. Sonmez Atesoglu & Donald Dutkowsky, 1997. "On the dynamics of balance of payments constrained growth," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1343-1351.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:10:p:1343-1351
    DOI: 10.1080/00036849700000025
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    References listed on IDEAS

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    5. Rao, B Bhaskara, 1992. "Some Further Evidence on the Policy Ineffectiveness Proposition," Economic Journal, Royal Economic Society, vol. 102(414), pages 1244-1250, September.
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    7. 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.
    8. Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-348, November.
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