On the role of relative prices and capital flows in balance-of-payments-constrained growth: the experiences of Portugal and Spain in the euro area

Broadly speaking, the balance-of-payments constraint hypothesis as developed by Thirlwall has been empirically supported. Yet it shows some shortcomings highlighted in the literature. In our opinion, two of them must be analyzed. First, temporary disequilibria and capital flows must be incorporated into the balance-of-payments-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 analyze the evolution of the Spanish and Portuguese economies in past decades, and, in particular, the different paths shown by both countries since their accession to the euro zone.exchange rate, external constraint, growth,

Accounting for Irish growth: a balance-of-payments-constraint approach

Less than 20 years ago, the Irish economy was tired and sluggish, suffering from double-digit unemployment and stagnating incomes. Today, Ireland's "Celtic tiger" economy is one of the fastest growing in the world, exceeding average EUper capita income levels and boasting a thriving technology industry and productivity levels that are among the highest in Europe. In this study, we present a continuous-time disequilibrium model to explain economic growth in Ireland. In particular, we try to identify the key factors explaining the "Irish miracle" by developing a demand-oriented growth accounting methodology based on the balance-of-payments-constraint theory.external constraint, foreign direct investment, growth accounting, Irish economy, tax policy,