Why Thirlwall's law is not a tautology: more on the debate over the law

J.S.L. McCombie
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J.S.L. McCombie: University of Cambridge, UK

Review of Keynesian Economics, 2019, vol. 7, issue 4, 429-443

Abstract: This paper reconsiders the argument first debated in the 1980s and revisited by Blecker (2016) and Razmi (2016), inter alios, that Thirlwall's law is nothing but a near-identity. It is shown theoretically and by simulation analysis that this proposition is erroneous. It is also demonstrated that Razmi's (2016) specification of the balance-of-payments-constrained growth model is problematical. The paper concludes by assessing the effectiveness of the rate of change of relative prices for export and import growth. Recent evidence provides further support for the importance of non-price competitiveness in international trade and, hence, for Thirlwall's law.

Keywords: Thirlwall's law; balance-of-payments-constrained growth; tautology; price and non-price competitiveness (search for similar items in EconPapers)
JEL-codes: E12 F32 F43 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:7:y:2019:i:4:p429-443

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