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New insights from a structural economic dynamic approach to balance of payments constrained growth

Araujo, Ricardo Azevedo (2011): New insights from a structural economic dynamic approach to balance of payments constrained growth.

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Abstract

In this paper it is shown that once-for-all variations in the level of the exchange rate may play an important role in the sectoral composition of the economy and this fact has important implications in terms of a disaggregated version of the Thirlwall’s law even if the argument of the quantitative unimportance of relative price movements holds. The growth rate of a country is then shown to be affected by once-for-all movements in the level of nominal exchange rates and the concept of a natural exchange rate is introduced.

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