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The Balance-of-Payments-Constrained Growth Model and the Limits to Export-Led Growth

Robert Blecker

East Asian Economic Review, 2000, vol. 4, issue 4, 79-108

Abstract: This paper discusses how A. P. Thirlwall's model of balance-of-payments-constrained growth can be adapted to analyze the idea of a "fallacy of composition" in the export-led growth strategy of many developing countries. The Deaton-Muellbauer model of the Almost Ideal Demand System (AIDS) is used to represent the adding-up constraints on individual countries' exports, when they are all trying to export competing products to the same foreign markets (i.e. newly industrializing countries are exporting similar types of manufactured goods to the OECD countries). The relevance of the model to the recent financial crises in developing countries and policy alternatives for redirecting development strategies are also discussed.

Keywords: Export-led Growth; Balance Of Payments: Newly Industrializing Countries: Almost Ideal Demand System (search for similar items in EconPapers)
JEL-codes: F13 F14 (search for similar items in EconPapers)
Date: 2000
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