A Model of Adjustment and Growth: An Empirical Analysis
42 Pages Posted: 15 Feb 2006
Date Written: April 13, 1989
This paper develops a model merging the monetary approach to the balance of payments and a neoclassical growth model into a unified framework in which inflation, growth, and the balance of payments are simultaneously determined. The empirical part of the paper presents estimates of the key parameters of the model for a sample of seven diverse developing countries and tests the validity of a subset of the theoretical assumptions. The estimated model is then used for a variety of comparative static exercises, including the effects of fiscal and monetary policy changes, and devaluation.
JEL Classification: 1211, 4300
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