Thirlwall's law and the terms of trade: a parsimonious extension of the balance-of-payments-constrained growth model
Por:
Perez Caldentey, Esteban, Carlos Moreno-Brid, Juan
Publicada:
1 oct 2019
Categoría:
Economics and econometrics
Resumen:
This paper extends the balance-of-payments-constrained (BoPC) growth
model and Thirlwall's law to include the terms of trade with and without
capital flows. Without capital flows a positive (negative) change in the
terms of trade by improving (worsening) export performance can ceteris
paribus augment (reduce) the rate of growth of an economy compatible
with balance of payments' long-run equilibrium. With the inclusion of
capital flows the BoPC dynamics become more complex. Assuming no changes
in the real exchange rate and in the import elasticity of demand, an
improvement in the terms of trade can increase the level of the external
deficit compatible with BoPC growth. This results from the
terms-of-trade effects on the purchasing of exports and on
foreign-capital inflows. The positive effect of an improvement in the
terms of trade may be partially offset by an appreciation of the real
exchange rate and an increase in the import elasticity of demand, when
the model is extended to allow for such interactions in the analysis.
Filiaciones:
Perez Caldentey, Esteban:
Comis Econ Amer Latina & Carib, Econ Dev Div, Financing Dev Unit, Santiago, Chile
Carlos Moreno-Brid, Juan:
Univ Nacl Autonoma Mexico, Econ, Mexico City, DF, Mexico
Financing for Development Unit, Economic Development Division, Economic Commission for Latin America and the CaribbeanSantiago, Chile
Department of Economics, UNAMMexico City, Mexico
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