Long- and short-run balance of payments adjustment: Argentine economic growth constrained

Abstract

This article addresses insights on Argentina's slowness growth performance throughout the period 1968 to 2003 and, especially, on its recent crisis in 2002. Using time series unit roots tests, vector auto-regresive models and cointegration tests, this study deals with the effect of the external sector constraint on Argentinean output expansion and, in particular, with the empirical validation of a variant of Thirlwall's Law. The results suggest that, in the long-run, there exists a stable relationship between economic growth, exports and even terms of trade. These findings allow us to conclude that Argentina's international payments position constraints its economic activity.

Notes

¹ We include relative prices due to the central role played by fix exchange rate policy making implemented in Argentina since the launching of Convertibility Plan in 1991.