Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/64192
Authors: 
Razmi, Arslan
Year of Publication: 
2009
Series/Report no.: 
Working Paper, University of Massachusetts, Department of Economics 2009-10
Abstract: 
This paper derives the balance of payments-constrained growth (BPCG) model as a special case of a three good framework that incorporates exportables, importables, and non-tradables. The conditions under which the canonical form of the BPCG rate can be derived are made explicit and the assumptions scrutinized. It is shown that the presence of non-tradables, substitutability between exportables and importables, and incomplete specialization in expenditure generally dampen the externally-constrained growth rate. These findings help explain why empirical estimates tend to overestimate the BPCG rate. Overall our findings under-score the observation that tests of the BPCG hypothesis are as much a test of the internal structure of the economy under consideration.
Subjects: 
balance of payments-constrained growth model
non-tradables
demand-led growth
real exchange rates
terms of trade
JEL: 
F41
F43
O41
Document Type: 
Working Paper

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