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On the Role of Relative Prices and Capital Flows in Balance-of-Payments Constrained Growth: the Experiences of Portugal and Spain in the Euro Area

Garcimartín, Carlos and Rivas, Luis and García Martínez, Pilar (2010) On the Role of Relative Prices and Capital Flows in Balance-of-Payments Constrained Growth: the Experiences of Portugal and Spain in the Euro Area. [ Working Papers; nº 05/10, ]

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Abstract

Broadly speaking, the balance-of-payments constraint hypothesis as developed by Thirlwall
has been empirically supported. Yet, it shows some shortcomings highlighted in the
literature. In our opinion, two of them must be analysed. First, temporary disequilibria
and capital flows must be incorporated into the balance-of-payments constrained growth
models. Second, the role of relative prices must be made explicit, since it can be relevant
even in an external constraint framework. This study is aimed at developing a model that
incorporates both possibilities: temporary external disequilibria and a the impact of relative
prices. This model is subsequently used to analyse the evolution of the Spanish and
Portuguese economies in last decades, and, in particular, the different path shown by both
countries since their accession to the Eurozone.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Growth, Balance of payments constraint, Exchange rate.
Subjects:Social sciences > Economics > Economic development
Social sciences > Economics > Commerce
Social sciences > Economics > Economic indicators
Series Name:Working Papers
Volume:
Number:05/10
ID Code:10529
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Deposited On:27 Apr 2010 10:16
Last Modified:06 Feb 2014 08:44

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