Abstract
This study empirically seeks to connect more strongly the post-Keynesian macroeconomic idea anchored on the balance of payment (BOP) constraint with the evolutionary microeconomic idea related to the dynamics of technological gap in shaping export quality and long-run growth. It employs autoregressive distributed lag model to examine the validity of Thirlwall’s “Law” on the Nigerian economy from 1981 to 2017. The study found that new version of the model improves significantly in explaining long-run growth of the economy. Therefore, it recommends, among others, a cautious reduction of various components of imports especially final consumption, increasing the export share of commodities with high demand in the international market as well as increasing government spending on R&D to enhance export quality for a sustainable growth of the economy.
Highlights
IntroductionThis present study proposes to expand the basic proposition of balance of payment constrained growth (BOPCG) theory with particular reference to Periphery-South economy by including real exchange rate (RER) and the role of national innovation system (NIS) in growth determination
Keywords balance of payments constraint, relative prices, technological gap, national innovation system, economic growth. This present study proposes to expand the basic proposition of balance of payment constrained growth (BOPCG) theory with particular reference to Periphery-South economy by including real exchange rate (RER) and the role of national innovation system (NIS) in growth determination
BOPCG essentially contends that growth is demand led and, in particular, export led in line with export-led cumulative causation (ELCC) models
Summary
This present study proposes to expand the basic proposition of balance of payment constrained growth (BOPCG) theory with particular reference to Periphery-South economy by including real exchange rate (RER) and the role of national innovation system (NIS) in growth determination. BOPCG essentially contends that growth is demand led and, in particular, export led in line with export-led cumulative causation (ELCC) models This post-Keynesian perspective recognizes the role of external demand and structural change in explaining the long-run growth path of an economy. Gabriel, Jayme, and Oreiro (2016) recently show, in line with the above, that growth of exports has two most important consequences on the long-run growth rate It increases the growth rate through the dynamic Harrod foreign trade multiplier and, second, by soothing the BOPs constraint. It allows higher expansion of other “autonomous” constituents of demand. This means that the increase of other autonomous expenditures is essentially endogenous to the growth of export
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