Economic Growth and the External Sector in Ecuador’s Economy

Abstract:

This article explains the balance of payments constraint imposed on Ecuador's economic growth during the period 1970–2007. By using the Thirlwall’s model (1979), a modification is made, stating that the real exchange rate (RER) should not be considered constant in the long term due to the negative impact of the Marshall-Lerner condition on the balance of the trade balance. Through an econometric study, a cointegration vector between GDP, exports and RER is determined. This is a valid adjustment to explain the balance of payments constraint on economic growth.

Año de publicación:

2010

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Fuente:

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