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

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  • Paul Turner

Abstract

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.

Suggested Citation

  • Paul Turner, 1999. "The Balance of Payments Constraint and the Post 1973 Slowdown of Economic Growth in the G7 Economies," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(1), pages 41-53.
  • Handle: RePEc:taf:irapec:v:13:y:1999:i:1:p:41-53
    DOI: 10.1080/026921799101724
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. J. S. L. McCombie, 1993. "Economic Growth, Trade Interlinkages, and the Balance-of-Payments Constraint," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 15(4), pages 471-505, July.
    3. John S.L. McCombie, 1997. "On the Empirics of Balance-Of-Payments–Constrained Growth," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 345-375, March.
    4. 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.
    5. 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.
    6. Paul Davidson, 1997. "Introduction," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 311-312, March.
    7. H. Sonmez Atesoglu, 1994. "Balance of payments determined growth in Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 1(6), pages 89-91.
    8. Robert A. Blecker, 1992. "Structural Roots of U.S. Trade Problems: Income Elasticities, Secular Trends, and Hysteresis," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 14(3), pages 321-346, March.
    9. 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.
    10. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
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    Cited by:

    1. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
    2. Khalid Abu-Ismail, 2003. "The Myth of Export-Led Growth," Working Papers 0335, Economic Research Forum, revised 11 2003.

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