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Article
Publication date: 8 May 2017

Rafael Saulo Marques Ribeiro, John S.L. McCombie and Gilberto Tadeu Lima

The purpose of this paper is to contribute to the literature on demand-driven Keynesian growth in open economies by developing a formal model that combines Dixon and Thirlwall’s…

422

Abstract

Purpose

The purpose of this paper is to contribute to the literature on demand-driven Keynesian growth in open economies by developing a formal model that combines Dixon and Thirlwall’s (1975) export-led growth model and Thirlwall’s (1979) balance-of-payments constrained growth model into a more general specification. Then, based on the model developed in this paper, the authors analyse more broadly some important issues concerning the net impact of currency depreciation on the short-run growth.

Design/methodology/approach

The authors build upon Dixon and Thirlwall’s (1975) export-led growth model and Thirlwall’s (1979) balance-of-payments constrained growth model in order to develop the theoretical framework. The authors also run numerical simulations to illustrate the net impact of devaluation on the short-run growth rate in different scenarios.

Findings

The authors demonstrate that the net impact of currency devaluation on growth can go either way, depending on some structural conditions such as the average share of imported intermediate inputs in prime costs of domestic firms and the institutional capacity of trade unions to set nominal wages through the bargaining process. The model also shows that the effectiveness of a competitive real exchange rate to promote growth is higher in countries where the share of labour in domestic income is also higher.

Research limitations/implications

This paper provides a coherent formal starting-point for further theoretical developments on the interrelatedness between currency devaluation, income distribution and growth. These findings provide empirically testable hypothesis for future research.

Originality/value

The present study proposes an alternative formal solution for the theoretical problem of imposing a balance-of-payments constraint on the process of cumulative causation often incorporated in Kaldorian growth models. In terms of policy, the framework sheds further light on the relevance of income distribution and the labour market institutional framework for the dynamics of the exchange rate pass-through mechanism and allows us to map out related conditions under which currency devaluation can promote growth.

Details

Journal of Economic Studies, vol. 44 no. 2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 10 May 2013

Raphael Rocha Gouvêa and Gilberto Tadeu Lima

The aim of this paper is to contribute to the literature on balance‐of‐payments‐constrained growth by providing an innovative empirical evaluation of a disaggregated version of…

971

Abstract

Purpose

The aim of this paper is to contribute to the literature on balance‐of‐payments‐constrained growth by providing an innovative empirical evaluation of a disaggregated version of the so‐called Thirlwall's Law derived from a Pasinettian multisectoral framework.

Design/methodology/approach

After estimating sectoral elasticities of exports and imports for a considerable panel dataset of 90 countries over the period 1965‐1999, the authors have performed two empirical exercises. First, they grouped countries together by income level and evaluated a multisectoral balance‐of‐payments‐constrained growth model by analyzing prediction errors and mean absolute deviations. Second, the authors carried out a regression validity test on the results.

Findings

The main findings give support to the validity of the multisectoral version of Thirlwall's Law, providing therefore further understanding of the structural determinants of the uneven international development and guidance for the design of growth‐enhancing national structural policies.

Originality/value

The main value added of this contribution to the existing literature lies in the use of disaggregated trade data in conjunction with modern panel data econometric techniques to obtain empirical estimates on the balance‐of‐payments constraints to long‐run economic growth for an unprecedently large sample of countries.

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Article
Publication date: 9 May 2016

Carolina Troncoso Baltar, Celio Hiratuka and Gilberto Tadeu Lima

– The purpose of this paper is to study the impact of the real exchange rate on investment in the Brazilian manufacturing industry.

1672

Abstract

Purpose

The purpose of this paper is to study the impact of the real exchange rate on investment in the Brazilian manufacturing industry.

Design/methodology/approach

The authors develop an investment model that considers the effect of changes in the real exchange rate, taking into account that the effect of the real exchange rate on the Brazilian manufacturing investment operates through demand and cost channels. The composition of these effects varies across manufacturing sectors, with different repercussions on investment decisions, depending on sectoral characteristics. A panel data analysis is applied to estimate the model for the Brazilian manufacturing sectors from 1996 to 2010.

Findings

One main result is that the responsiveness of the Brazilian manufacturing investment to real exchange rate varies considerably across manufacturing sectors. Overall, the results contribute to a better understanding of the relationship between exchange rate dynamics, manufacturing investment and industrial development, thus unveiling important empirical elements for the debate on industrial policies to stimulate manufacturing investment and production.

Originality/value

As the (scant) empirical literature on real exchange rate and investment in Brazil has invariably been using aggregate data, this paper contributes to the literature by obtaining sectoral estimates of the responsiveness of manufacturing investment to exchange rate fluctuations that further the understanding of the complex relationship between these economic variables.

Details

Journal of Economic Studies, vol. 43 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Available. Open Access. Open Access
Article
Publication date: 20 September 2024

Carmem Feijo

This paper, based on the 2022 Master Class delivered at the 50th National Economic Meeting organized by ANPEC, discusses how post-Keynesian macroeconomics and New Developmentalism…

335

Abstract

Purpose

This paper, based on the 2022 Master Class delivered at the 50th National Economic Meeting organized by ANPEC, discusses how post-Keynesian macroeconomics and New Developmentalism complement each other to understand middle-income economies' development in financial globalization. It summarizes my academic reflection about the advance in post-Keynesian thinking to develop macroeconomics for peripheral middle-income economies.

Design/methodology/approach

As part of this reflection, I first bring up the idea of a developmental convention and, next, how peripheral financialization impacts the elaboration of this convention. Given the asymmetric configuration of the international financial system and the context of hierarchical currencies, I discuss the challenge of overcoming underdevelopment in peripheral economies. The post-Keynesian macroeconomics and advances in the structuralist debate provide the analytical tools to understand how peripheral economies develop virtuous or vicious growth cycles. At the end of the paper, I present some comments on the stagnation of the Brazilian economy.

Findings

The growth strategy with foreign savings does not provide the conditions for middle-income economies to operate with sufficient economic policy autonomy to promote productive transformation. To this end, a developmental convention should replace the neoliberal convention that has dominated since the 1970s.

Originality/value

The dynamics of peripheral, middle-income economies, often influenced by international liquidity flows, are a crucial area of study. This research underscores the importance of understanding these dynamics, as it forms the basis for economic policy recommendations. The paper also highlights the inadequacy of the growth strategy with foreign savings in the current configuration of the international financial system, emphasizing the need for middle-income economies to operate with greater economic policy autonomy to foster productive transformation.

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Book part
Publication date: 7 May 2019

Mauro Boianovsky

This article provides a detailed investigation of how Lewis revisited classical and Marxian concepts such as productive/unproductive labor, economic surplus, subsistence wages…

Abstract

This article provides a detailed investigation of how Lewis revisited classical and Marxian concepts such as productive/unproductive labor, economic surplus, subsistence wages, reserve army, and capital accumulation in his investigation of economic development. The Lewis 1954 development model is compared to other models advanced at the time by Harrod, Domar, Swan, Kaldor, Solow, von Neumann, Nurkse, Rosenstein-Rodan, Myint, and others. Lewis applied the notion of economic duality to open and closed economies.

Details

Including A Symposium on 50 Years of the Union for Radical Political Economics
Type: Book
ISBN: 978-1-78769-849-9

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