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Trade Liberalisation, the Balance of Payments and Growth in Latin America

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  • Penelope Pacheco-Lopez

    ()

  • A.P. Thirlwall

    ()

Abstract

Thispaper applies the balance of payments constrained growth model to seventeen countries of Latin America over the period 1977-2002. The crucial parameter to estimate is the income elasticity of demand for imports which is done for Latin America as a whole, as well as for individual countries. As well as estimating over the whole period, the technique of rolling regressions is also used to test whether a trend increase can be discerned as a result of trade liberalisation. A trend increase is found for Latin America as a whole and for some individual countries, and the balance of payments equilibrium growth rate is a good predictor of growth performance in nine of the seventeen countries. There is no evidence that the balance of payments equilibrium growth rate has increased in Latin America as a result of trade liberalisation.

Suggested Citation

  • Penelope Pacheco-Lopez & A.P. Thirlwall, 2005. "Trade Liberalisation, the Balance of Payments and Growth in Latin America," Studies in Economics 0506, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:0506
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    References listed on IDEAS

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    1. H. Sonmez Atesoglu, 1993. "Balance-of-Payments-Constrained Growth: Evidence from the United States," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 15(4), pages 507-514, July.
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    3. Pennelope Pacheco-Lopez & Anthony P. Thirlwall, 2004. "Trade liberalisation in Mexico: rhetoric and reality," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 57(229), pages 141-167.
    4. Hubert Hieke, 1997. "Balance-Of-Payments–Constrained Growth: A Reconsideration of the Evidence for the U.S. Economy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 313-325, March.
    5. Thirlwall, Anthony P & Hussain, Mohammed Nureldin, 1982. "The Balance of Payments Constraint, Capital Flows and Growth Rate Differences between Developing Countries," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 498-510, November.
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    11. Amelia Santos-Paulino & A. P. Thirlwall, 2004. "The impact of trade liberalisation on exports, imports and the balance of payments of developing countries," Economic Journal, Royal Economic Society, vol. 114(493), pages 50-72, February.
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    14. H. Sonmez Atesoglu, 1994. "Balance of payments determined growth in Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 1(6), pages 89-91.
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    17. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Penelope Pacheco-Lopez & A.P. Thirlwall, 2005. "Trade Liberalisation, the Balance of Payments and Growth in Latin America," Studies in Economics 0505, School of Economics, University of Kent.
    2. Kurtovic, Safet & Halili, Blerim & Maxhuni, Nehat, 2016. "Liberalization of Trade with Leading Trade Partners: Some Evidence from Bosnia and Herzegovina," MPRA Paper 75053, University Library of Munich, Germany, revised 04 Nov 2016.

    More about this item

    Keywords

    Latin America; trade liberalisation; growth; balance of payments;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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