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Reconciling Supply and Demand: New Evidence on the Adjustment Mechanisms between Actual and Potential Growth Rates

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  • Arthur B. Cordeiro
  • João P. Romero

Abstract

This paper contributes to the debate surrounding supply-oriented and demand-oriented growth theories. By investigating the link between changes in the rate of resource utilization, the volume of imports and the growth of productivity, it aims at providing a better understanding of the mechanisms that reconcile supply and demand in the long-term. The results point to a demand determination of economic growth, with the burden of adjustment falling over the potential rate of growth. Increases in the rate of resource utilization seem to have a positive effect on productivity and no effect on the volume of imports.

Suggested Citation

  • Arthur B. Cordeiro & João P. Romero, 2023. "Reconciling Supply and Demand: New Evidence on the Adjustment Mechanisms between Actual and Potential Growth Rates," Review of Political Economy, Taylor & Francis Journals, vol. 35(1), pages 334-355, January.
    • Handle: RePEc:taf:revpoe:v:35:y:2023:i:1:p:334-355
    DOI: 10.1080/09538259.2021.1939939
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