The balance-of-payments constraint on economic growth in a long-term perspective: Spain, 1850-2000* Oscar Bajo-Rubio
(Universidad de Castilla-La Mancha)
This version, September 2011
The balance of payments can act as a constraint on the rate of growth of output, since it puts a limit on the growth in the level of demand to which supply can adapt. In this paper, we examine this issue for the case of Spain, using time series data extending over the period 1850-2000. Overall, the external deficit does not seem to have worked as a constraint on the growth of the Spanish economy over the long run, unless some shorter and specific subperiods, such as 1940-1959 and 1959-1974. The Spanish economy seems to have used external deficits to smooth her level of aggregate consumption, which would be supported by the finding of sustainability of current account deficits along the period of analysis.
* The author wish to thank an anonymous referee for helpful comments to a previous version. Financial support from the Spanish Ministry of Science and Innovation (Project ECO2008-05072-C02-01), and from the Department of Education and Science of the regional government of Castilla-La Mancha (Project PEII09-0072-7392), is also gratefully acknowledged.