The Thirlwall's model of economic growth using state space representation and time-variying parameter stimation throught the Kalman filter: theory and empirical application for El Salvador, 1965-2010

Abstract

This thesis work centers its attention in understanding, from a Post Keynesian point of view, which are the main factors that have influenced the economic growth rate of El Salvador during the period of 1965 to 2010. The theoretical model that is developed in this research is commonly known as the Thirlwall Law. Its relevance in this scenario resides in the fact that it places demand as the main force that configures the dynamic of the economies and its link to the external sector. With this framework of analysis, the estimation is performed through the specification of time-variying coefficients in the form of a State-Space representation and the application of the Kalman filter algorithm to obtain a series of the price and demand elasticities of imports and exports.