Balanced growth path

Updated: Aug 20, 2021

An equilibrium in which major aggregate economic variables, such as output and the capital stock, grow at the same and the real interest rate is constant. This reflects historic observations of the long-term stability of interest rates and capital-to-output ratios in developed countries. In development economics, the balanced growth path refers to simultaneous and coordinated expansion of several sectors of an economy (also known as a big push). This is in contrast to the concept of unbalanced growth, in which a large investment in one sector of a developing economy generates, through backward and forward linkages, the scope for expansion in other sectors.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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