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Imposing A Balance Of Payment Constraint On The Kaldorian Model Of Cumulative Causation, Arslan Razmi
Imposing A Balance Of Payment Constraint On The Kaldorian Model Of Cumulative Causation, Arslan Razmi
Economics Department Working Paper Series
We combine two strands of Post Keynesian growth theory by imposing a balance of payments constraint on a Kaldorian cumulative causation model. The effects of external and internal shocks, and the degree to which cumulative causation comes into play depends on the exchange rate and capital account regimes. Exports act as the only exogenous drivers of growth only under a regime of fixed exchange rates and in the absence of relative price effects. Under flexible exchange rates, by contrast, it is internal demand that serves as the only exogenous driver of of growth. Moreover, regardless of the type of shock, …
Can Asia Sustain An Export-Led Growth Strategy In The Aftermath Of The Global Crisis? An Empirical Exploration, Gonzalo Hernandez, Arslan Razmi
Can Asia Sustain An Export-Led Growth Strategy In The Aftermath Of The Global Crisis? An Empirical Exploration, Gonzalo Hernandez, Arslan Razmi
Economics Department Working Paper Series
Many developing countries have attempted to pursue the East Asian growth model in recent decades. This model is widely perceived to have been based on export-led growth. Given that developed countries are likely to grow at a slower rate and be less willing to run trade deficits in the post financial crisis world, can this growth model be sustained? Using panel data for Asian countries, this paper contributes to addressing this question by distinguishing between different kinds of export- and tradable-led growth in order to more precisely identify the nature of growth in the pre-crisis decades. We find in particular …
External Contradictions Of The Chinese Development Model: Export-Led Growth And The Dangers Of Global Economic Contraction, Thomas I. Palley
External Contradictions Of The Chinese Development Model: Export-Led Growth And The Dangers Of Global Economic Contraction, Thomas I. Palley
PERI Working Papers
China’s development model faces an external constraint that could cause an economic hard landing. China has become a global manufacturing powerhouse, and its size now renders its export-led growth strategy unsustainable. China relies on the U.S. market, but the scale of its exports is contributing to the massive U.S. trade deficit, creating financial fragility and undermining the U.S. manufacturing sector. These developments could stall the U.S. economy’s expansion, in turn triggering a global recession that will embrace China. This is the external constraint. These considerations suggest China should transition from export-led growth to domestic demand-led growth. This requires growing the …
The Fallacy Of The Revised Bretton Woods Hypothesis: Why Today’S System Is Unsustainable And Suggestions For A Replacement, Thomas I. Palley
The Fallacy Of The Revised Bretton Woods Hypothesis: Why Today’S System Is Unsustainable And Suggestions For A Replacement, Thomas I. Palley
PERI Working Papers
Dooley et al. (2003) have argued that today’s international financial system has structural similarities with the earlier Bretton Woods (1946 – 71) arrangements and is stable. This paper argues that the comparison is misplaced and ignores fundamental microeconomic differences, and that today’s system is also vulnerable to a crash. Eichengreen (2004) and Goldstein and Lardy (2005) have also argued that the system is unsustainable. However, their focus is the sustainability of financing to cover the U.S. trade deficit, whereas the current paper focuses on inadequacies on the system’s demand side. The paper concludes with suggestions for a global system of …
Price Competition And The Fallacy Of Composition In Developing Country Exports Of Manufactures: Estimates Of Short-Run Growth Effects, Robert A. Blecker, Arslan Razmi
Price Competition And The Fallacy Of Composition In Developing Country Exports Of Manufactures: Estimates Of Short-Run Growth Effects, Robert A. Blecker, Arslan Razmi
Economics Department Working Paper Series
This paper studies whether intra-developing country price competition has significant effects on the short-run growth rates of developing countries that are specialized in manufactured exports. Regression estimates using the generalized method of moments (GMM) applied to annual panel data for 17 developing countries in 1983-2004 show that these countries exhibit a “fallacy of composition,” in the sense that a real depreciation relative to competing developing country exporters increases the home country’s growth rate in the short run. The results also suggest that real depreciations for these developing countries relative to the industrialized countries are contractionary.