Economics at your fingertips  

Growth transitions and the balance-of-payments constraint

Excellent Mhlongo and Kevin Nell ()
Additional contact information
Excellent Mhlongo: College of Business and Economics, School of Economics, University of Johannesburg, South Africa

Review of Keynesian Economics, 2019, vol. 7, issue 4, 498-516

Abstract: This paper re-evaluates the recent criticisms of 'Thirlwall's law' against the literature on growth transitions. The unpredictable nature of growth transitions in developing economies suggests that the evidence derived from single-regime regression models, on which critics have based most of their arguments, is only suggestive about the long-run causes of growth. A rigorous test of Thirlwall's law requires a more in-depth analysis of turning points in a developing country's growth performance, and whether the growth law accurately predicts the sustainability of growth transitions. These arguments are illustrated with an application to South Africa over the period 1960–2017. The results show that it is misleading to evaluate Thirlwall's law across a single regime. Once regime shifts are controlled for, the growth law accurately predicts South Africa's growth performance during 1977–2003, and sheds light on the sustainable and unsustainable nature of growth transitions across the sub-periods 1960–1976 and 2004–2017, respectively. Since the literature on growth transitions identifies a competitive exchange rate as an initiating source of growth, rather than an individual long-run determinant, the omission of the level of the real exchange rate from the original growth law should not be regarded as a major weakness.

Keywords: balance-of-payments-constrained growth; growth transitions; multiple regimes; South Africa (search for similar items in EconPapers)
JEL-codes: E12 F43 O11 O24 O25 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)
Restricted access

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Review of Keynesian Economics is currently edited by Thomas Palley, Matías Vernengo and Esteban Pérez Caldentey

More articles in Review of Keynesian Economics from Edward Elgar Publishing
Bibliographic data for series maintained by Phillip Thompson ().

Page updated 2021-03-28
Handle: RePEc:elg:rokejn:v:7:y:2019:i:4:p498-516