Premium
How Could the South Respond to Secular Stagnation in the North?
Author(s) -
Mayer Joerg
Publication year - 2017
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12389
Subject(s) - economics , balance of payments , aggregate demand , income elasticity of demand , developing country , economic stagnation , relative price , constraint (computer aided design) , international economics , demand management , macroeconomics , monetary economics , labour economics , monetary policy , economic growth , politics , mechanical engineering , engineering , political science , law
Abstract Developed countries face the risk of a sustained lack of aggregate demand, that is, secular stagnation. Demand‐oriented growth models emphasising the balance‐of‐payments constraint raise concerns about attendant adverse growth impacts on developing countries from reduced export growth. These concerns are well‐founded, albeit less serious than the simplest versions of these models would imply. Relaxing their assumptions and emphasising cumulative causation forces from domestic‐demand growth and relative price effects indicates how developing countries can combine export and domestic‐demand based strategies and how changed policies can maintain rapid growth while reducing the income elasticity of import demand.