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Balance-of-Payment-Constrained Growth: The Case of China, 1979-2002

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  • Yongbok Jeon

Abstract

The aim of this study is to empirically test the validity of Thirlwall’s Law in China during the reform period of 1979-2002. For the income elasticity of import demand, an aggregate import demand function for the Chinese economy is estimated using ARDL-UECM model and the bounds test. This study finds (1) that for 1979-2002, the Chinese economy has grown on average as fast as Thirlwall’s Law predicts, the average actual growth rate and predicted growth rate were, respectively, 9.25 and 8.55, which are statistically identical; (2) that the growth of GDP and of exports are cointegrated. Both (1) and (2) provide strong support for Thirlwall’s Law in China during the reform period after 1978. The supportive result of Thirlwall’s Law implies the relevance of demand-side approach to economic growth in China.

Suggested Citation

  • Yongbok Jeon, 2006. "Balance-of-Payment-Constrained Growth: The Case of China, 1979-2002," Working Paper Series, Department of Economics, University of Utah 2006_06, University of Utah, Department of Economics.
  • Handle: RePEc:uta:papers:2006_06
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    Keywords

    Chinese economy; balance-of-payment constrained growth; aggregate import function; trade multiplier; bounds test for cointegration;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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