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Balance of Payments Constrained Growth Model: The Case of India

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  • Arslan Razmi

    () (University of Massachusetts Amherst)

Abstract

This study applies the Balance of Payments Constrained Growth (BPCG) model to India, a large developing country with a relatively low trade to GDP ratio. Rather than assuming similar elasticities of substitution between goods produced in different regions, the study extends the model to relax these assumptions. Johansen’s cointegration technique is employed to estimate trade parameters. Short-run adjustments are explored within a vector error correction framework. The average growth rates predicted by various forms of the BPCG hypothesis are found to be close to the actual average growth rate over the period 1950-1999, although individual decades display substantial deviations. JEL Categories: F43, F14, E12

Suggested Citation

  • Arslan Razmi, 2005. "Balance of Payments Constrained Growth Model: The Case of India," UMASS Amherst Economics Working Papers 2005-05, University of Massachusetts Amherst, Department of Economics.
  • Handle: RePEc:ums:papers:2005-05
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Keshab Raj Bhattarai, 2016. "Economic Growth and Development in India and SAARC Countries," EcoMod2016 9631, EcoMod.
    2. Blecker, Robert A. & Ibarra, Carlos A., 2013. "Trade liberalization and the balance of payments constraint with intermediate imports: The case of Mexico revisited," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 33-47.
    3. Gökçe, Atilla & Çankal, Erhan, 2013. "Balance-of-payments constrained growth model for the Turkish economy," Economic Modelling, Elsevier, vol. 35(C), pages 140-144.
    4. Bruno Jetin & Ozan Ekin Kurt, 2016. "Functional income distribution and growth in Thailand: A post Keynesian econometric analysis," Post-Print hal-01484216, HAL.
    5. Carlos A. Ibarra & Robert A. Blecker, 2016. "Structural change, the real exchange rate and the balance of payments in Mexico, 1960–2012," Cambridge Journal of Economics, Oxford University Press, vol. 40(2), pages 507-539.
    6. Mini P. Thomas, 2016. "Impact of services trade on India’s economic growth and current account balance: evidence from post-reform period," Working Papers 2016/11, Maastricht School of Management.
    7. repec:gei:jnlfer:v:2:y:2017:i:1:p:1-15 is not listed on IDEAS
    8. Ana Lourdes Morones Carrillo, 2016. "Crecimiento económico en México: restricción por la balanza de pagos," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 39-58, May.
    9. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
    10. Maria Carolina Basso, 2016. "A Economia Brasileira Sob Restrição Do Balanço De Pagamentos: Uma Análise Empírica Da Lei De Thirlwall No Boom Das Commodities," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42ndd Brazilian Economics Meeting] 089, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    11. Halicioglu, Ferda, 2012. "Balance-of-Payments Constrained Growth: the Case of Turkey," MPRA Paper 41791, University Library of Munich, Germany.
    12. repec:rim:rimwps:41-07 is not listed on IDEAS

    More about this item

    Keywords

    Balance of payments-related constraints; real exchange rates; Johansen’s cointegration technique; strong form; weak form; trade multiplier; import compression.;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian

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