ECOS3007 International Macroeconomics

1.     What is the view of the relation between aggregate demand and output reflected in Thirlwall’s balance of payments-constrained growth thesis?

2.     What significance is attributed by Thirlwall to movements in growth rates vis a vis movements in the real exchange rate as a means of eliminating balance of payments imbalances?

3.     What is the economic interpretation of Thirlwall’s equation for the balance of payments-constrained growth rate? 

4.     What does Thirlwall’s analysis assume about price elasticities and cross elasticities of demand ?

5.     Assume for argument’s sake that all countries in the world are growing at less than the rate required for full-employment of their respective labour force; and that some of these countries are balance of payments-constrained and some are not. What is the significance of Thirlwall’s thesis in terms of allowing for world growth closer to that required for full-employment?

6.     Supposing instead of a balanced trade account, that equilibrium in the balance of payments is defined in terms of a sustainable ratio of foreign debt to income. What factors determine the nature of the trade balance required to achieve equilibrium defined in these terms?