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Growth and the Balance-of-Payment Constraint

Author

Listed:
  • Alexander, R.
  • King, A.

Abstract

Thirwall's law posits that a country's economic growth rate (relative to that of the rest of the world) depends on a ratio of its export's income elastcity of demand to that of its imports. Empirical studies of this hypothesis have almost been entirely supportive, but we argue that the method used is flawed due to its reliance on least-squares estimates of the income elasticities. Using the Johansen procedure, we test for a long-run relationship between domestic and world income for the G7 nations and find little evidence that Thriwall's law holds.

Suggested Citation

  • Alexander, R. & King, A., 1998. "Growth and the Balance-of-Payment Constraint," Department of Economics - Working Papers Series 622, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:622
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    Citations

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    Cited by:

    1. Nelson H. Barbosa-Filho, 2001. "The balance-of-payments constraint:from balanced trade to sustainable debt," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 381-400.
    2. Nelson H. Barbosa Filho, 2001. "International Liquidity and Growth in Brazil," SCEPA working paper series. 2001-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.

    More about this item

    Keywords

    ECONOMIC GROWTH ; EXPORTS ; IMPORTS ; ELASTICITY;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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