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date: 23 January 2022

Abstract and Keywords

Post-Keynesian economists concerned with long-run growth in open economies have developed two related but fundamentally different theoretical approaches: the export-led cumulative causation model and the balance-of-payments-constrained growth model. The first approach stresses the possibility that some countries can achieve ever-widening “virtuous circles” of faster technological progress, improving competitiveness, rising exports, and rapid output growth (although, in this view, other countries may be doomed to suffer “vicious circles” of slower technological progress, worsening competitiveness, stagnant exports, and sluggish output growth). On the other hand, models of balance-of-payments-constrained growth emphasize the limitations placed upon a nation’s growth by the need to finance necessary imports through either export growth or financial inflows. This chapter looks at the key theoretical differences between the two approaches and evaluates how and to what extent they can be reconciled by representing both in a common analytical framework.

Keywords: long-run growth, cumulative causation, balance of payments, virtuous circles, exports, output growth, competitiveness, technological progress, open economies, imports

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