The La Marca model revisited: Structuralist goodwin cycles with evolutionary supply side and balance of payments constraints

D. Spinola*

*Corresponding author for this work

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Abstract

This research is aimed at investigating the causes of volatility that affect middle-income countries by studying the La Marca model. Drawing from the open-economy Goodwin tradition, this model demonstrates that economic activity, income distribution and accumulation of foreign assets dynamically interact, resulting in a pattern of dampened cycles. The study consists in analyzing the characteristics of the model by initially imposing: (I) a constant real exchange rate; (II) a constant net external asset to capital ratio, which is in line with the balance of payments dominance theory and (III) a fixed income distribution. We then (IV) expand the original model by adding an evolutionary supply-side in which productivity is at the center of the economic dynamic through international technology transfer and the Kaldor-Verdoorn effect.
Original languageEnglish
Pages (from-to)189-212
Number of pages24
JournalMetroeconomica
Volume72
Issue number1
DOIs
Publication statusPublished - 1 Feb 2021

JEL classifications

  • o47 - "Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence"
  • o49 - Economic Growth and Aggregate Productivity: Other
  • o39 - Technological Change: Other

Keywords

  • demand
  • driven
  • economic-growth
  • endogenous technical change
  • growth cycles
  • kaldor-verdoorn
  • macroeconomic dynamics
  • structuralism
  • Kaldor-Verdoorn
  • DRIVEN
  • DEMAND
  • ENDOGENOUS TECHNICAL CHANGE
  • ECONOMIC-GROWTH

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