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Does the balance of payments constrain economic growth? Some evidence for the new EU members

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  • Oscar Bajo-Rubio
  • Carmen Diaz-Roldan

Abstract

The balance of payments can act as a constraint on the rate of growth of output, since it puts a limit on the growth in the level of demand to which supply can adapt. This article examines this issue for the case of several transition countries, namely, those Central and Eastern European countries that joined the EU in 2004, and calculates their balance of payments-constrained growth rates. Comparing these balance of payments-constrained growth rates with the actual growth rates enables us to assess whether the balance of payments has acted as a constraint on economic growth in the countries analysed.

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  • Oscar Bajo-Rubio & Carmen Diaz-Roldan, 2009. "Does the balance of payments constrain economic growth? Some evidence for the new EU members," Post-Communist Economies, Taylor & Francis Journals, vol. 21(1), pages 41-46.
    • Handle: RePEc:taf:pocoec:v:21:y:2009:i:1:p:41-46
    DOI: 10.1080/14631370802663612
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    References listed on IDEAS

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    1. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 99-125.
    2. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
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    Cited by:

    1. Juan Carlos Cuestas & Estefanía Mourelle & Paulo José Regis, 2020. "Real exchange rate misalignments in CEECs: Have they hindered growth?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(4), pages 733-756, November.
    2. Elias Soukiazis & Eva Muchová & Peter Leško, 2017. "Are the Transition Economies Balance-of-Payments Constrained? An Aggregate and Multisector Approach Applied to Central and Eastern Europe," Eastern European Economics, Taylor & Francis Journals, vol. 55(5), pages 453-476, September.
    3. Karsten Staehr, 2018. "Capital flows and growth dynamics in Central and Eastern Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 30(1), pages 1-18, January.
    4. Simeon Coleman & Juan Carlos Cuestas, 2019. "Current account and structural change in European transition economies," Working Papers 2019/08, Economics Department, Universitat Jaume I, Castellón (Spain).
    5. Mohammed Al- Mahish, 2017. "Does Balance of Payments Constrained Growth Model Hold in Saudi Arabia?," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 2(1), pages 1-15, March.
    6. Oscar Bajo-Rubio & Carmen D�az-Roldán, 2012. "Do exports cause growth? Some evidence for the new EU members," Post-Communist Economies, Taylor & Francis Journals, vol. 24(1), pages 125-131, August.
    7. Luis Quintana-Romero & Nam Kwon Mun & Roldán Andrés-Rosales & José Álvarez-García, 2020. "Trade Complementarity and the Balance of Payments Constraint Hypothesis: A New Free Trade Agreement between Mexico and South Korea," Mathematics, MDPI, vol. 8(10), pages 1-21, October.
    8. Ramos-Herrera María del Carmen, 2022. "How Equilibrium Exchange Rate Misalignments Influence on Economic Growth? Evidence for European Countries," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 16(1), pages 199-211, January.

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