African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4079

Full Length Research Paper

An application of Thirlwall’s law to the South African economy: Evidence from ARDL bounds testing approach

  Ilhan Ozturk1 and Ali Acaravci2        
1Faculty of Economics and Administrative Sciences, Cag University, 33800, Mersin, Turkey. 2Department of Economics, Mustafa Kemal University, Antakya-Hatay, Turkey.
Email: [email protected]

  • Article Number - AEE197C21395
  • Vol.4(2), pp. 262-266 , February 2010
  •  Accepted: 16 November 2009
  •  Published: 28 February 2010

Abstract

 

This paper applies Thirlwall’s basic balance-of-payments constraint growth model to South Africa economic growth for the period of 1984:1 - 2006:1 by using Autoregressive Distributed Lag (ARDL) Bounds Testing approach. The empirical results reveal that import is cointegrated with relative price and income, and the equilibrium growth rates coincide with actual growth rates. Our empirical results also support the Thirlwall’s hypothesis which states that balance of payments position of the South African economy is the main constraint on its economic growth. As a policy implication, a successful economic growth policy will permit South Africa to have a rapid growth in demand and supply without suffering deterioration in its balance of payments.

 

Key words: Growth, balance of payments, Thirlwall´s Law, bounds testing approach, South Africa.