Balance of Payments Constrained Growth Models: History and Overview
PSL Quarterly Review, Vol. 64, No. 259, pp. 307-351, 2011
45 Pages Posted: 2 May 2012
Date Written: December 15, 2011
Thirlwall’s 1979 balance of payments constrained growth model predicts that a country’s long run growth of GDP can be approximated by the ratio of the growth of real exports to the income elasticity of demand for imports assuming negligible effects from real exchange rate movements. The paper surveys developments of the model since then, allowing for capital flows, interest payments on debt, terms of trade movements, and disaggregation of the model by commodities and trading partners. Various tests of the model are discussed, and an extensive list of papers that have examined the model is presented.
Keywords: balance of payments, growth, Thirlwall’s law, dynamic Harrod multiplier
JEL Classification: F32, F40, F43
Suggested Citation: Suggested Citation