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The balance-of-payments constraint:from balanced trade to sustainable debt

Nelson Barbosa-Filho

BNL Quarterly Review, 2001, vol. 54, issue 219, 381-400

Abstract: This paper extends the balance-of-payments constraint on growth known as Thirlwall's law to incorporate unbalanced trade and debt accumulation. Assuming that small open economies face a liquidity constraint, the text shows the growth and real-exchange-rate policy rules consistent with a stable ratio of net exports to income. Given such rules, the text shows how the trade balance of a small open economy is residually determined by the ratio of foreign debt to income allowed by international conditions.

Keywords: Balance of Payments; Open Economies; Open Economy (search for similar items in EconPapers)
JEL-codes: F32 F41 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (31)

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Working Paper: The Balance-of-payments Constraint: From Balanced Trade to Sustainable Debt (2002) Downloads
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