Thoughts on balance-of-paymentsconstrained growth after 40 years

Anthony Thirlwall

Review of Keynesian Economics, 2019, vol. 7, issue 4, 554-567

Abstract: This paper considers how Thirlwall's balance-of-payments-constrained growth model has fared over the preceding 40 years. Issues dealt with include how the model fits into Harrod's closed-economy dynamic model; whether the model is a tautology; the role of the exchange rate and terms of trade in influencing the long-run growth rate, and whether capital inflows make any difference to the long-run predictions of the model. The conclusion is that it is mainly the structure of production and trade that determines the long-run growth rate of countries, within a balance-of-payments equilibrium framework, as determinants of the income elasticities of demand for exports and imports.

Keywords: open-economy macroeconomics; balance-of-payments-constrained growth; the Harrod trade multiplier; Thirlwall's law (search for similar items in EconPapers)
JEL-codes: F41 F43 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (17)

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