Structural breaks, reserve currency and balance of payments constrained growth: a test of Thirlwall's law in the UK (1950-2017)

Ufuk Gunes Bebek, Wentao Li

Research output: Contribution to journalArticlepeer-review

Abstract

We apply Thirlwall’s law (Thirlwall 1979) to estimate long run growth in the UK. In particular, we develop a new test allowing for potential structural breaks based on 2SLS to remedy potential weaknesses that existed in previous methods. Our results show the UK had different balance of payments positions over different time periods, and its growth has been constrained over the past two decades. We further elaborate on the pound’s changing role as a reserve currency and how this has affected the UK’s external constraint and growth.

Original languageEnglish
JournalApplied Economics
Early online date20 Jul 2021
DOIs
Publication statusE-pub ahead of print - 20 Jul 2021

Bibliographical note

Publisher Copyright:
© 2021 Informa UK Limited, trading as Taylor & Francis Group.

Keywords

  • Thirlwall's Law
  • Balance of payments
  • Reserve currency
  • uk
  • Growth

ASJC Scopus subject areas

  • Economics and Econometrics

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