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Endogenous growth, capital accumulation and Thirlwall's dynamics: the case of Latin America

Ignacio Perrotini-Hernández and Juan Alberto Vázquez-Muñoz

Keywords: growth; capital accumulation; balance of payments; Latin America

The article draws together the analyses of the interaction between economic capacity (ec), the endogeneity of the natural growth rate (gn) and the growth rate consistent with balance-of-payments equilibrium (gtb) that constrains economic activity. We identify two possible scenarios: the self-correcting scenario where gtb is more elastic than the normal natural rate of growth (gnn) vis-à-vis ec, and the self-aggravating scenario where gnn is more elastic than gtb with respect to ec. We empirically assess our central tenet (ec is a determinant of the relations between gtb, gw and gnn) for the cases of Argentina, Brazil, Chile and Mexico, and found that, in all countries, the relationships between ec and gnn and between ec and gtb are positive, except in the case of Argentina where the relation between gtb and ec was negative in the sub-period 1975–1990.

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