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How could the South respond to secular stagnation in the North?

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  • Mayer, Jörg
Abstract
Developed countries face the risk of a sustained lack of aggregate demand, i.e. secular stagnation. Demand-oriented growth models emphasizing 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 emphasizing 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. Crucial is investment that reduces gaps between the composition of domestic production and domestic demand and emphasizes sectors with cumulative-causation effects, combined with incomes policy and capital-account management. Drawing down excessive foreign-exchange reserves and obtaining concessionary loans from development banks can finance required capital-goods imports, especially in countries with insufficient innovation capacity. Enhanced South-South integration may be an important complement for small countries.

Suggested Citation

  • Mayer, Jörg, 2015. "How could the South respond to secular stagnation in the North?," IDOS Discussion Papers 8/2015, German Institute of Development and Sustainability (IDOS).
    • Handle: RePEc:zbw:diedps:82015
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    2. Serdeczny, Olivia & Waters, Eleanor & Chan, Sander, 2016. "Non-economic loss and damage in the context of climate change: understanding the challenges," IDOS Discussion Papers 3/2016, German Institute of Development and Sustainability (IDOS).
    3. Anja Janischewski & Katharina Bohnenberger & Matthias Kranke & Tobias Vogel & Riwan Driouich & Tobias Froese & Stefanie Gerold & Raphael Kaufmann & Lorenz Key{ss}er & Jannis Niethammer & Christopher O, 2024. "It depends: Varieties of defining growth dependence," Papers 2409.12109, arXiv.org.
    4. Altenburg, Tilman & Kulke, Elmar & Reeg, Caroline & Peterskovsky, Lisa & Hampel-Milagrosa, Aimée, 2016. "Making retail modernisation in developing countries inclusive: a development policy perspective," IDOS Discussion Papers 2/2016, German Institute of Development and Sustainability (IDOS).
    5. Adrian Wood, 2017. "Variation in structural change around the world, 1985–2015: Patterns, causes and implications," WIDER Working Paper Series 034a, World Institute for Development Economic Research (UNU-WIDER).
    6. Reeg, Caroline, 2015. "Micro and small enterprises as drivers for job creation and decent work," IDOS Discussion Papers 10/2015, German Institute of Development and Sustainability (IDOS).

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    More about this item

    Keywords

    Entwicklungsfinanzierung und öffentliche Finanzen; Handel und Investitionen;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

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