New Structuralism and the Balance-of-Payments Constraint

Gabriel Porcile () and Giuliano Toshiro Yajima ()

No 4/19, Working Papers from Sapienza University of Rome, DISS

Abstract: Structuralists and Post-Keynesians share the perspective that in the long run economic growth is shaped by the income elasticity of exports and imports, and that such elasticities are a positive function of the degree of diversification and technological intensity of the pattern of specialization. Since the mid-seventies, New Structuralists began to stress the role of two set of variables in driving the pattern of specialization: a stable and competitive real exchange rate, and the relative intensity of innovation / diffusion of technology in center and periphery. In this paper we modify the Balance-of-Payments constrained growth model to include these two set of variables. The model provides a mechanism that ensures the validity of the original Thirlwall’s perspective, namely that adjustment to the Balance-of-Payments-constrained equilibrium takes place through changes in the rate of growth of aggregate demand rather than through changes in relative prices. In addition, it shows that a macroeconomic policy aimed at sustaining a competitive real exchange rate is a necessary complement to an active industrial policy for fostering international convergence.

Keywords: BOP-constrained growth models; Technological innovation; Structural Change. (search for similar items in EconPapers)
JEL-codes: F43 O40 O41 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Journal Article: New Structuralism and the balance-ofpayments constraint (2019)
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