Exchange rate policies, patterns of specialization and economic development : theory and evidence in developing countries

AUTOR(ES)
DATA DE PUBLICAÇÃO

02/07/2010

RESUMO

The objectives of this paper are twofold. First, it intends to provide theoretical elements to analyze the relation between real exchange rates and economic development. Our main hypothesis is very much in line with the Dutch disease literature, and states that competitive currencies contribute to the existence and maintenance of the manufacturing sector in the economy. This, in turn, brings about higher growth rates in the long run, given the existence of increasing returns in the industrial sector, and its importance in generating technological change and increasing productivity in the overall economy. The second objective of this paper is empirical. It intends to analyze examples of successful exchange rate policies, such as Chile and Indonesia in the eighties, as a benchmark for comparison with countries where currency overvaluation has taken place, such as Brazil. In the latter case, the local currency is being inflated by large capital inflows, due to high domestic interest rates and to a boom in demand and prices of commodities in the international markets. It will be argued that the industrial sector bears most of the burden when the currency appreciates, and that Brazil risks at deindustrialization if there are no changes in the exchange rate regime

ASSUNTO(S)

exchange rate policy patterns of specialization economic development desenvolvimento econômico câmbio

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