ABSTRACT
The concept of the "virtuous" circle and of its counterpart the "vicious" circle has provided a useful organizing framework in models of trade and growth for some time (Beckerman, 1962; Kaldor, 1965, chap. 3). This concept stresses the importance of exports for growth and employment, and once initiated, the cumulative nature of export and growth success or failure. Consider the nature of a virtuous circle. Export growth plays a key role; the more rapid it is, the less will be the need to constrain aggregate demand (AD) to avoid an adverse trade balance. In other words, the less likely are the authorities to be faced with a payments constraint (Thirlwall, 1979).
