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Stabilization and Growth in Developing Countries by L. Taylor

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5. DISTRIBUTION, GROWTH AND INFLATION IN THE MEDIUM RUN

The topic at hand is how inflation and distributional change affect the pattern of growth over time. A full treatment in an open economy model like the one herein could take many pages—Taylor [41] and Marglin and Bhaduri [28] on closed economies are already lengthy. Here, we just point out key linkages, concentrating on the real side of the system. An algebraic treatment is presented for a one-sector model, and extensions to several sectors are briefly sketched.

A few paragraphs should be devoted to setting the stage. The short-run system is described by (6) for inflation, (20) for the interest rate, and equations for internal and external balance. If we don’t consider interest rate cost-push, ...

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