Reconciling Supply and Demand: New Evidence on the Adjustment Mechanisms between Actual and Potential Growth Rates

Arthur B. Cordeiro and João Prates Romero (jpromero@cedeplar.ufmg.br)

Review of Political Economy, 2023, vol. 35, issue 1, 334-355

Abstract: This paper contributes to the debate surrounding supply-oriented and demand-oriented growth theories. By investigating the link between changes in the rate of resource utilization, the volume of imports and the growth of productivity, it aims at providing a better understanding of the mechanisms that reconcile supply and demand in the long-term. The results point to a demand determination of economic growth, with the burden of adjustment falling over the potential rate of growth. Increases in the rate of resource utilization seem to have a positive effect on productivity and no effect on the volume of imports.

Date: 2023
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DOI: 10.1080/09538259.2021.1939939

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