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The Impossible Quartet in a Demand Led Growth-Supermultiplier Model for a Small Open Economy

José Luís Oreiro and Julio Fernando Costa Santos

No PKWP2215, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: The aim of this paper is to investigate the long run sustainability of a growth path led by multiple non-creating capacity autonomous expenditures in a demand led-supermultiplier model for a small open economy. Using two different models the results show that it is impossible to have in the same model long-term economic growth driven by the non-capacity creating component of domestic demand, exogenous income distribution, long-run balance between productive capacity and aggregate demand and balance of payments equilibrium. Economic viability of the balanced-growth path demands growth to be led by exports, at least for small open economies.

Keywords: Post-Keynesian Economics; Growth and Distribution; Srafian Supermutiplier; Simulation Models (search for similar items in EconPapers)
JEL-codes: E12 E37 P10 (search for similar items in EconPapers)
Pages: 32
Date: 2022-05
New Economics Papers: this item is included in nep-gro, nep-mac, nep-opm and nep-pke
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