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The Balance of Payments Constraint and the Post 1973 Slowdown of Economic Growth in the G7 Economies

  • Paul Turner

This paper presents estimates of export and import demand functions for the G7 economies over the period 1956 to 1995 and over two sub-periods 1956-73 and 1974-95. These estimates are used to construct predictions of the equilibrium growth rates for these economies by use of the 'Thirlwall's Law' relationship. The estimates are consistent with observed cross country growth patterns over the whole sample and the post 1973 period but are less convincing in the pre 1973 sub-period. It is argued that the slowdown in economic growth after 1973 can be partly explained by the growing internationalisation of the world economy coupled with a slowdown in the overall growth of world trade.

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Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 13 (1999)
Issue (Month): 1 ()
Pages: 41-53

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Handle: RePEc:taf:irapec:v:13:y:1999:i:1:p:41-53
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  1. J. S. L. McCombie & A. P. Thirlwall, 1997. "The Dynamic Harrod Foreign Trade Multiplier and the Demand-orientated Approach to Economic Growth: an Evaluation," International Review of Applied Economics, Taylor & Francis Journals, vol. 11(1), pages 5-26.
  2. James G. MacKinnon, 2010. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
  3. John S. L. McCombie, 1997. "On the Empirics of Balance-of-Payments-Constrained Growth," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 19(3), pages 345-375, April.
  4. H. Sonmez Atesoglu, 1994. "Balance of payments determined growth in Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 1(6), pages 89-91.
  5. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  6. Jonathan Perraton & Paul Turner, 1999. "Estimates of industrial country export and import demand functions: implications for 'Thirlwall's Law'," Applied Economics Letters, Taylor & Francis Journals, vol. 6(11), pages 723-727.
  7. H. Sonmez Atesoglu, 1995. "An explanation of the slowdown in US economic growth," Applied Economics Letters, Taylor & Francis Journals, vol. 2(4), pages 91-94.
  8. Robert A. Blecker, 1992. "Structural Roots of U.S. Trade Problems: Income Elasticities, Secular Trends, and Hysteresis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 14(3), pages 321-346, April.
  9. J. S. L. McCombie, 1993. "Economic Growth, Trade Interlinkages, and the Balance-of-Payments Constraint," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 15(4), pages 471-505, July.
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