PlumX Metrics
Embed PlumX Metrics

The balance of payments-constrained growth rate and the natural rate of growth: New empirical evidence

Cambridge Journal of Economics, ISSN: 1464-3545, Vol: 38, Issue: 4, Page: 817-838
2014
  • 37
    Citations
  • 0
    Usage
  • 30
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    37
    • Citation Indexes
      33
    • Policy Citations
      4
      • Policy Citation
        4
  • Captures
    30

Article Description

This paper implements a panel approach to investigate the empirical relevance of 'Thirlwall's law', which states that long-run growth must be consistent with balance of payments (BOP) equilibrium and is thus determined on the demand side. Building on autoregressive distributed lag modelling, mean-group and pooled mean-group estimation methods, we use annual data over the 1960-2010 period for a panel of 22 OECD countries and find significant support for the 'law'. Next, we also explore empirically the hypothesis that the BOP-constrained growth rate (y) must equal the natural (or potential) rate of growth (y) and find that the data do not reject this hypothesis. Finally, we adopt a new approach, based on panel Granger causality methods, to explore the direction of causality between y and y. The results indicate the existence of unidirectional long-run causality from y to y, thus reinforcing the view, embodied in the law that long-run growth is determined by demand and constrained by the BOP. © The Author 2014. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Provide Feedback

Have ideas for a new metric? Would you like to see something else here?Let us know