THE ROLE OF CAPITAL FLOWS IN EXTERNAL CONSTRAINED GROWTH: THE EXPERIENCES OF SPAIN AND PORTUGAL IN THE EUROZONE

Öz

Broadly speaking, the balance-of-payments constraint hypothesis has been empirically supported. Yet, it shows some shortcomings highlighted in the literature. In our opinion, two of them must be analysed. First, temporary disequilibria and capital flows must be incorporated into the balance-ofpayments constrained growth models. Second, the role of relative prices must be made explicit, since it can be relevant even in an external constraint framework. This study is aimed at developing a model that incorporates both possibilities: temporary external disequilibria and the impact of relative prices. This model is subsequently used to analyse the evolution of the Spanish and Portuguese economies in last decades, and, in particular, the different paths shown by both countries since their accession to the Eurozone

Anahtar Kelimeler

• Growth, external constraint, Exchange rate

Kaynakça

1. Alberola, E.; Cervero, S. G.; López, H.; and Ubide A. “Global Equilibrium Exchange Rates - Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework”, IMF Working Papers 99/175, 1999, International Monetary Fund.
2. Alberola, E. and López J. H. “Internal and external exchange rate equilibrium in a cointegration framework: an application to the Spanish peseta”, Spanish Economic Review, 2001, vol,3, n.1, 23
3. Alonso, J. A. and Garcimartín, C. “A new approach to balance-of-payments-constrained growth model”. Journal of Postkeynesian Economics, 1998, Vol. 21, nº. 2, 259-282.
4. Antunes, M. and Soukiazis, E. “How well the balance-of-payments constraint approach explains the Portuguese growth performance. Empirical evidence for the 1965-2008 Period”, Working
5. Paper nº. 13, GEMF (Grupo de Estudos Monetários e Financeiros), Universidade de Coimbra, Coimbra, Portugal, 2009
6. Bagnai, A. “Structural breaks, cointegration, and the empirics of Thirlwall’s law”, Applied Economics, November 2008, 42(10), 1-15 .
7. Banco de España. “Una actualización de las funciones de exportación e importación de la economía española” [An update on export and import functions of the Spanish economy], Boletín Económico, diciembre 2008, Banco de España.
8. Bennett, H.; Escolano, J.; Fabrizio, S.; Gutiérrez, E.; Ivaschenko, I.; Lissovolik, B.; Moreno- Badia, M.; Schule, W.; Tokarick, S.; Xiao, Y.; and Zarnic, Z. “Competitiveness in the Southern Euro Area: France, Greece, Italy, Portugal, and Spain”, IMF Working Paper, 08/112, 2008.

9. Blanchard, O. “Adjustment within the euro. The difficult case of Portugal”. Portuguese Economic Journal, April 2007, Vol. 6, No. 1, 1-21.
10. Buisán, A., J.; Caballero C.; and Jiménez, N. “Determinación de las exportaciones de manufacturas en los países de la UEM a partir de un modelo de oferta-demanda” [Determination of manufactured exports in the EMU countries using a supply-demand model, Boletín Económico, octubre 2003, nº 0406, Banco de España.
11. Bulir, A. and Smidkova, K., “Exchange rates in the new EU accession countries: what have we learned from the forerunners?”, Economic Systems 29(2), 2005, 163–186.
12. Decressin, J and Stavrev, E. "Current Accounts in a Currency Union." Working Paper 09/127, International Monetary Fund, Washington, DC, 2009
13. Faini, R.; Pritchett, L; and Clavijo, F. “Import Demand in Developing Countries”, World Bank Working Paper, 1988, Country Economics Department, Trade Policy,.
14. Garcimartín, C., Rivas, L. and Díaz, S. “Accounting for the Irish growth: a balance-ofpayments- constrint approach”, Journal of Post Keynesian Economics, 2008, Vol. 30, nº. 3, 409-433.
15. Martinez-Mongay, C. “Spain and Portugal in the Euro Area: Lessons for Cyprus”, Cyprus Economic Policy Review, 2008, vol. 2 no. 1, pp. 33-62.
16. Mauleón, I. and Sastre, L. “El saldo comercial en 1993: un análisis econométrico”, Información
17. Comercial Española, 1994, 735, 167-172.
18. Senhadji, A. and Montenegro, C. “Time Series Analysis of Export Demand Equations: A Cross- Country Analysis”, IMF Staff Papers, 1999, Vol. 43, No.3, 259-273
19. Thirlwall, A. “Balance of payments constraint as an explanation ofinternational growth rate differences”. Banca Nazionale del Lavoro Quarterly Review, 1979, 128(1), 45-53.
20. Appendix Data description and data sources The variables used to estimate the model are in constant prices, except Z1, which must necessarily be in current prices. The sample period is 1975-2007, except for the estimation of the exchange rate equation, whose sample period is 1975-1998.