Balance of Payments Constrained Growth in Thailand during 1980-2010: Empirical Evidences and Long-term Policy Considerations
DOI:
https://doi.org/10.14456/tresp.2015.3Keywords:
Thirlwall’s Law, Balance of Payments Constrained Growth Model, Thai Economic GrowthAbstract
This paper aims to explore whether the demand-oriented approach is able to explain the Thai economy from the 1980s onwards. In particular, it is going to empirically test whether the Balance of Payments Constrained Growth Model – the so-called Thirlwall’s law – can estimate Thai economic growth rates from 1980 to 2010. Not only does the paper prove that Thirlwall’s law can explain the Thai economy, but it also shows that the extended Thirlwall’s law is better than the original model. The results suggest that international trade is important for the economy because it can relax the balance of payments constraints and hence lead to economic growth. However, engaging in international trade is not equivalent to free trade. Policymakers need to keep in mind that resistance to free trade in order to develop some crucial industries may yield better long-run ability to meet export demand.
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