Balance-constrained growth rates: generalizing Thirlwall’s law

Abstract

In this article, we show how the concept of balance of payments-constrained growth rate developed by Thirlwall (1979) can be generalized as the growth rate constrained by the balance between any two economic variables. In particular, we derive two new concepts: the government balance-constrained growth rate and the private balance-constrained growth rate. Some extensions of the basic model are also provided.

Keywords:

• economic growth
• balance of payments
• government balance
• private balance
• Thirlwall’s law

JEL Classification:

• E20
• F43
• H62
• O40