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Levels of Economic Development and the Harrod Foreign Trade

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  • Gairuzazmi Ghani

    (USC)

Abstract

Estimates of export and import demand functions for ninety countries using Stock and Watson (1993) Dynamic OLS are presented. These estimates are then used to examine the relationship between levels of economic development and the dynamic Harrod foreign trade multiplier. We show that there is an inverted U-shape relation, as predicted by Thirlwall (1997), contrary to Bairam (1993, 1997). The absence of an inverse relation between levels of economic development and the dynamic Harrod foreign trade multiplier means that Thirlwall's law implies divergence.

Suggested Citation

  • Gairuzazmi Ghani, 2005. "Levels of Economic Development and the Harrod Foreign Trade," International Trade 0501008, University Library of Munich, Germany, revised 26 Jun 2005.
    • Handle: RePEc:wpa:wuwpit:0501008
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    References listed on IDEAS

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    1. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    2. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, April.
    3. Sala-i-Martin, Xavier X, 1996. "The Classical Approach to Convergence Analysis," Economic Journal, Royal Economic Society, vol. 106(437), pages 1019-1036, July.
    4. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    5. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    6. Erkin I. Bairam, 1997. "Levels of Economic Development and Appropriate Specification of the Harrod Foreign-Trade Multiplier," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 337-344, March.
    7. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    8. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    9. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-125, May.
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    More about this item

    Keywords

    Harrod foreign trade multiplier; Thirlwall Law; Trade elaticities;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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