Harrod's Dynamics and the Kaldor-Thirlwall Export-led Growth
This paper investigates an open economy macrodynamic model on Harrodian lines. The analysis starts with a reconsideration of the post-Keynesian ThirlwallÃ¢ÂÂs approach to growth in open economy. We cast doubt on the Thirlwall idea aimed at rendering the concept of HarrodÃ¢ÂÂs foreign trade multiplier genuinely consistent with HarrodÃ¢ÂÂs dynamics. Following a different procedure from ThirwallÃ¢ÂÂs approach, we start from HarrodÃ¢ÂÂs dynamics in a closed economy and investigate what happens when the foreign trade is introduced. An important result of our model is that, according to HarrodÃ¢ÂÂs intuition, there is less cyclical instability in the open economy than in the closed one where chaotic instability prevails. Dynamics in our model exhibits a limit cycle. Finally, the model shows that the possibility of an export-led growth strictly depends on the technical progress dynamics.
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