Demand and Defective Growth Patterns: The Role of the Tradable and Non-tradable Sectors in an Open Economy
Sandile Hlatshwayo, Michael Spence
American Economic Review · 2014 · Volume 104 · Issue 5
Abstract
This paper examines the underlying structural elements of US growth patterns, pre- and post-crisis. Prior to the recession, the US economy exhibited a defective growth pattern driven by outsized domestic demand. As domestic aggregate demand retreats to more sustainable levels relative to total income, the tradable side of the economy is a catalyst for restoring strong growth. A structural rebalancing is already underway; although it is only a third of the economy, the tradable sector generated more than half of gross gains in value-added since the start of the recovery. However, distributional issues loom on the horizon.
Keywords
Macroeconomics: Production, Business Fluctuations, Cycles, Economic Growth of Open Economies, Financial Crises
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