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East Asian Economic Review Vol. 4, No. 4, 2000. pp. 79-108.

DOI https://dx.doi.org/10.11644/KIEP.JEAI.2000.4.4.74

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The Balance-of-Payments-Constrained Growth Model and the Limits to Export-Led Growth

Author

Robert A. Blecker

American University

blecker@american.edu
Creative Commons Attribution License

EAER is an open access journal distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license.

Abstract

This paper discusses how A. P. Thirlwall’s model of balance-of-payments-constrained growth can be adapted to analyze the idea of a “fallacy of composition” in the export-led growth strategy of many developing countries. The Deaton-Muellbauer model of the Almost Ideal Demand System (AIDS) is used to represent the adding-up constraints on individual countries’ exports, when they are all trying to export competing products to the same foreign markets (i.e. newly industrializing countries are exporting similar types of manufactured goods to the OECD countries). The relevance of the model to the recent financial crises in developing countries and policy alternatives for redirecting development strategies are also discussed.

JEL classification: F13, F14

Keywords

Export-led Growth, Balance of Payments, Newly Industrializing Countries, Almost Ideal Demand System

Language

English

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