Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105772
Authors: 
Razmi, Arslan
Year of Publication: 
2013
Series/Report no.: 
Working Paper, University of Massachusetts, Department of Economics 2013-12
Abstract: 
The BPCG model provides an interesting hypothesis regarding economic growth. The main implication is that world demand places a constraint on individual country performance. I discuss this implication and argue that tests of the BPCG model have essentially been tests of the hypothesis that trade is balanced over the long run; a plausible hypothesis but one that need not hold mainly due to demand-side constraints. I then discuss the role of relative prices and investment, point out logical inadequacies in the traditional BPCG framework, and suggest an alternative theoretical framework to investigate its robustness. Our theoretical and empirical explorations contribute to reconciling evidence supporting the BPCG hypothesis with recent work that consistently ?nds an important role for the level of the real exchange rate and investment, independently of world demand growth.
Subjects: 
Balance of payments-constrained growth model
accumulation
demand-led growth
real exchange rates
terms of trade
JEL: 
F41
F43
F32
Document Type: 
Working Paper

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