The relevance of Thirlwall’s growth law in the Zambian economy

Abstract

This paper uses a blended methodology—conventional tests of ‘Thirlwall's law’ combined with an in-depth growth narrative approach and unit root tests—to identify the dominant balance-of-payments adjustment mechanism in the Zambian economy over the period 1956–2017. Consistent with Thirlwall's growth law, the main results identify income changes as the dominant balance-of-payments adjustment mechanism, rather than relative price changes. The three-regime export demand function further reflects the vulnerability of the Zambian economy to unexpected busts in the world copper market, and highlights the need for effective industrial policies to create a more diversified economy into higher value-added manufactures. The analysis also demonstrates that the results are robust to some of the main criticisms that have been levelled against Thirlwall's original growth law.