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New Structuralism and the Balance-of-Payments Constraint

Author

Listed:
  • Gabriel Porcile

    () (Economic Affairs Officer, ECLAC and UFPR (Brazil))

  • Giuliano Toshiro Yajima

    () (Department of Social Sciences and Economics, Sapienza University of Rome (IT).)

Abstract

Structuralists and Post-Keynesians share the perspective that in the long run economic growth is shaped by the income elasticity of exports and imports, and that such elasticities are a positive function of the degree of diversification and technological intensity of the pattern of specialization. Since the mid-seventies, New Structuralists began to stress the role of two set of variables in driving the pattern of specialization: a stable and competitive real exchange rate, and the relative intensity of innovation / diffusion of technology in center and periphery. In this paper we modify the Balance-of-Payments constrained growth model to include these two set of variables. The model provides a mechanism that ensures the validity of the original Thirlwall’s perspective, namely that adjustment to the Balance-of-Payments-constrained equilibrium takes place through changes in the rate of growth of aggregate demand rather than through changes in relative prices. In addition, it shows that a macroeconomic policy aimed at sustaining a competitive real exchange rate is a necessary complement to an active industrial policy for fostering international convergence.

Suggested Citation

  • Gabriel Porcile & Giuliano Toshiro Yajima, 2019. "New Structuralism and the Balance-of-Payments Constraint," Working Papers 4/19, Sapienza University of Rome, DISS.
  • Handle: RePEc:saq:wpaper:4/19
    as

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    File URL: http://www.diss.uniroma1.it/sites/default/files/allegati/DiSSE_Porcile_Yajima_wp4_2019.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    BOP-constrained growth models; Technological innovation; Structural Change.;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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