Thirlwall's law and the long-term equilibrium growth rate: an application to Brazil

Abstract

This paper uses the balance-of-payments-constrained model to estimate the determinants of the long-run rate of growth of Brazil. Contrary to previous tests for the country found in the literature, this paper uses a different approach to test the long-run relationship between actual growth rates and those predicted by Thirlwall's law, extended to include capital flows. The regression results, apart from providing renewed support for the thesis that the country's growth rate has been constrained by the balance of payments, allow us to argue that Thirlwall's law is associated with a notion of long-run equilibrium growth rate which is fundamentally distinct from that of mainstream economics.

Keywords:

• balance-of-payments constrained
• Brazil
• growth
• import elasticity
• long-term equilibrium
• Thirlwall's law