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Balance of Payments Constrained Growth and Developing Countries: An examination of Thirlwall's hypothesis

  • Jonathan Perraton

Thirlwall's hypothesis of balance of payments constrained growth has been widely tested for developed countries, but much less for developing countries. Further, previous tests have used dated estimates derived using non-robust econometric techniques. After discussing the conditions under which Thirlwall's hypothesis would be valid and the econometric issues involved, this study reports error correction estimates of import and export demand functions for a large sample of developing countries. Deriving the long run income elasticities of demand from these functions, the study reports tests for different specifications of Thirlwall's hypothesis on this sample and finds some support for it.

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

Volume (Year): 17 (2003)
Issue (Month): 1 ()
Pages: 1-22

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Handle: RePEc:taf:irapec:v:17:y:2003:i:1:p:1-22
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  1. Lee, Jong-Wha, 1995. "Capital goods imports and long-run growth," Journal of Development Economics, Elsevier, vol. 48(1), pages 91-110, October.
  2. Marquez, Jaime, 1985. "Foreign exchange constraints and growth possibilities in the LDCs," Journal of Development Economics, Elsevier, vol. 19(1-2), pages 39-57.
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  4. Mody, Ashoka & Yilmaz, Kamil, 1997. "Is there persistence in the growth of manufactured exports? Evidence from newly industrializing countries," Journal of Development Economics, Elsevier, vol. 53(2), pages 447-470, August.
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  7. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
  8. Noland, Marcus, 1997. "Has Asian export performance been unique?," Journal of International Economics, Elsevier, vol. 43(1-2), pages 79-101, August.
  9. Ziesemer, Thomas, 1995. "Growth with imported capital goods, limited export demand and foreign debt," Journal of Macroeconomics, Elsevier, vol. 17(1), pages 31-53.
  10. Muscatelli, Vito Antonio & Stevenson, Andrew A & Montagna, Catia, 1995. "Modeling Aggregate Manufactured Exports for Some Asian Newly Industrialized Economies," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 147-55, February.
  11. 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.
  12. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
  13. Prema-Chandra Athukorala & James Riedel, 1996. "Modelling NIE exports: Aggregation, quantitative restrictions and choice of econometric methodology," Journal of Development Studies, Taylor & Francis Journals, vol. 33(1), pages 81-98.
  14. Abdelhak Senhadji, 1998. "Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 236-268, June.
  15. Faini, Riccardo & Clavijo, Fernando & Senhadji-Semlali, Abdel, 1992. "The fallacy of composition argument : Is it relevant for LDCs' manufactures exports?," European Economic Review, Elsevier, vol. 36(4), pages 865-882, May.
  16. Chow, Peter C. Y. & Kellman, Mitchell H., 1993. "Trade - The Engine of Growth in East Asia," OUP Catalogue, Oxford University Press, number 9780195078954.
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