The Balance-of-payments Constraint: From Balanced Trade to Sustainable Debt

Nelson Henrique Barbosa-Filho ()

No 2001-06, SCEPA Working Papers from Schwartz Center for Economic Policy Analysis (SCEPA), The New School

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 constraint; trade; debt; growth (search for similar items in EconPapers)
JEL-codes: F30 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pke
Date: 2002-01
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Persistent link: http://EconPapers.repec.org/RePEc:epa:cepawp:2001-06

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