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Economic growth and the long run balance of payments constraint in Spain


  • Jose M. Serrano Sanz
  • Marcela Sabate
  • Dolores Gadea


The Thirlwall's Law test has been extensively employed in order to explain, from the demand side, the differences in rates of economic growth between countries. In this paper the test is put to an alternative use, namely to explain the uneven economic growth experienced in one single country, Spain, during two different periods, 1940-59 and 1960-85. Specifically, we seek to determine whether the liberalization of Spanish trade which preceded its integration into the EEC (1960-85) - insofar as this liberalization increased the possibilities of placing national production in the foreign market-might explain the higher rate of economic growth enjoyed during this period, as compared with the earlier period of economic autarky (1940-59). To that end, we estimate the corresponding export and import demand functions (using the Autoregressive Distributed Lags methodology and the cointegration approach of Johansen) and apply the McCornbie test. We conclude that the Spanish balance of payments, although determining the difference in potential growth between the two periods, did not function, strictu sensu, as a demand constraint. Rather, the responsibility for this lay with prices, which relaxed the limits imposed by foreign demand on growth during the autarky period and tightened them during the liberalization period.

Suggested Citation

  • Jose M. Serrano Sanz & Marcela Sabate & Dolores Gadea, 1999. "Economic growth and the long run balance of payments constraint in Spain," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(4), pages 389-417.
  • Handle: RePEc:taf:jitecd:v:8:y:1999:i:4:p:389-417 DOI: 10.1080/09638199900000024

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    References listed on IDEAS

    1. O. Galor & H. M. Polemarchakis, 1987. "Intertemporal Equilibrium and the Transfer Paradox," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 147-156.
    2. Chichilnisky, Graciela, 1980. "Basic goods, the effects of commodity transfers and the international economic order," Journal of Development Economics, Elsevier, vol. 7(4), pages 505-519, December.
    3. Haaparanta, Pertti, 1989. "The intertemporal effects of international transfers," Journal of International Economics, Elsevier, vol. 26(3-4), pages 371-382, May.
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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. Santiago Grullón, 2013. "Effects of Price and Income on International Travel to the Dominican Republic: Co-integration and Causality Results," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 1(4), pages 107-114.

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    Demand constraint; opening-up; growth;


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