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Natural, effective and BOP-constrained rates of growth: Adjustment mechanisms and closure equations

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  • Porcile, Gabriel

    (Economic Commission for Latin America and the Caribbean (ECLAC) and Federal University of Parana (UFPR), Brazil)

  • Sartorello Spinola, Danilo

    (UNU-MERIT, Maastricht University)

Abstract

The interaction between the effective (yE) and the natural rates of growth (yN) is a central part-implicitly or explicitly addressed-in all growth models. A stable equilibrium requires these two rates to converge; otherwise, one or more key macroeconomic variables would be rising or falling without bounds. In addition, the Keynesian tradition stressed the key role of the Balance-of-Payments constraint as a determinant of the equilibrium growth rate in the long run (yBP). This paper discusses alternative mechanisms through which these three growth rates converge and relates them to different theoretical approaches to the determinants of growth. With this objective, we extend the model suggested by Setterfield (2010) to include the evolution of the North-South technology gap and the pattern of specialisation as key components of the Kaldorian productivity regime. The importance of the National System of Innovation in shaping the learning parameters and outcomes of the model is stressed, drawing from the Schumpeterian literature. A successful development strategy may emerge when the NSI enhances indigenous technological capabilities that allow the South economy to catch-up with the technological frontier.

Suggested Citation

  • Porcile, Gabriel & Sartorello Spinola, Danilo, 2018. "Natural, effective and BOP-constrained rates of growth: Adjustment mechanisms and closure equations," MERIT Working Papers 2018-003, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2018003
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    Cited by:

    1. Porcile, Gabriel & Sartorello Spinola, Danilo & Yajima, Giuliano, 2020. "Patterns of growth in structuralist models: The role of the real exchange rate and industrial policy," MERIT Working Papers 2020-027, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Cristiano Antonelli & Christophe Feder, 2020. "Total factor productivity, catch-up and technological congruence in Italy, 1861–2010," Journal of Evolutionary Economics, Springer, vol. 30(4), pages 1171-1194, September.
    3. Magacho, Guilherme R. & Spinola, Danilo, 2020. "Supply and demand in Kaldorian growth models: a proposal for dynamic adjustment," MERIT Working Papers 2020-032, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Spinola, Danilo, 2020. "Uneven development and the balance of payments constrained model: Terms of trade, economic cycles, and productivity catching-up," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 220-232.
    5. Althouse, Jeffrey & Guarini, Giulio & Gabriel Porcile, Jose, 2020. "Ecological macroeconomics in the open economy: Sustainability, unequal exchange and policy coordination in a center-periphery model," Ecological Economics, Elsevier, vol. 172(C).
    6. Danilo Spinola, 2021. "The La Marca model revisited: Structuralist goodwin cycles with evolutionary supply side and balance of payments constraints," Metroeconomica, Wiley Blackwell, vol. 72(1), pages 189-212, February.
    7. Porcile, Gabriel & Spinola, Danilo & Yajima, Giuliano, 2021. "Patterns of Growth in Structuralist Models: The Role of PoliticalEconomy," CAFE Working Papers 12, Centre for Applied Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.

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    More about this item

    Keywords

    BOP-constrained growth models; Growth Models; Structural Change; Technological Capabilities;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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