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Balance of Payments Constrained Growth Models: History and Overview

  • A. P. Thirlwall

    ()

This paper surveys balance of payments constrained growth models from Thirlwall’s original contribution in 1979 to the latest tests of the model using cointegration techniques. Historical antecedents of the model are explored (e.g. the Harrod trade multiplier; dual gap analysis; Prebisch’s centre-periphery model), and various extensions of the model are outlined including: capital flows; interest payments on debt, and generalisation of the model to include many countries and many goods. All the empirical literature, using time series, panel and cross section data, is documented with discussion of the tests employed. The basic model that long run GDP growth can be approximated by the ratio of export growth to the income elasticity of demand for imports is remarkably robust. The relevance of the model is shown for the current discussion of global imbalances in the world economy.

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Paper provided by School of Economics, University of Kent in its series Studies in Economics with number 1111.

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Date of creation: May 2011
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Handle: RePEc:ukc:ukcedp:1111
Contact details of provider: Postal: School of Economics, University of Kent, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 827497
Web page: http://www.kent.ac.uk/economics/

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