Growth and the Balance-of-Payment Constraint

R. Alexander and A. King

No 622, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: Thirwall's law posits that a country's economic growth rate (relative to that of the rest of the world) depends on a ratio of its export's income elastcity of demand to that of its imports. Empirical studies of this hypothesis have almost been entirely supportive, but we argue that the method used is flawed due to its reliance on least-squares estimates of the income elasticities. Using the Johansen procedure, we test for a long-run relationship between domestic and world income for the G7 nations and find little evidence that Thriwall's law holds.

Keywords: ECONOMIC GROWTH; EXPORTS; IMPORTS; ELASTICITY (search for similar items in EconPapers)
JEL-codes: F43 (search for similar items in EconPapers)
Pages: 29 pages
Date: 1998
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Citations: View citations in EconPapers (4)

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