Search

This paper proposes a methodology for the estimation of the current account equilibrium exchange rate - the exchange rate that guarantees the intertemporal current account equilibrium for a country. Moreover, the methodology is tested throughout appropriate econometric technics (VECM Models) for Argentina, Brazil, Chile, and Colombia, using quarterly data from around 2000 (according to data availability for each country) to 2020. The model includes both long-term structural variables such as terms of trade, goods and service trade as percentage of GDP and GDP per capita as well short term policy variables such as interest rate differential and EMBI plus. Apart from proposing an innovative methodology for estimating the current account equilibrium exchange rate, the paper brings important insights in terms of chronicle and cyclical appreciation (depreciation) of the exchange rate in LA countries. In addition, it shows high correlation between the exchange rate negative (positive) misalignments and the current account deficits (surpluses) in the countries analyzed. [ABSTRACT FROM AUTHOR]

From the 1980s, Brazil quasi-stagnated while East-Asia continued to grow. What went wrong? Classical developmentalists and post-Keynesians argue the cause was the desertion of the national developmental project based on structural change or industrialization. New-developmental economics agrees but is more specific: two historical new facts reduced investments. In the 1980s, a fiscal crisis of the state defined by negative public savings, broke up. This crisis, which was not resolved, led to the fall of public investments. As to private investments, they also have fallen as a percentage of GDP (when we compare with the 1970). They have fallen due to an action and an omission. The action was the mistaken adoption of growth with foreign indebtedness policy and the consequent excess of capital inflows. The omission was the suspension of the neutralization of the Dutch disease. Both resulted in a long-term overvaluation of the exchange rate and stopped industrialization. [ABSTRACT FROM AUTHOR]

From the 1980s, Brazil quasi-stagnated while East-Asia continued to grow. What went wrong? Classical developmentalists and post-Keynesians argue the cause was the desertion of the national developmental project based on structural change or industrialization. New-developmental economics agrees but is more specific: two historical new facts reduced investments. In the 1980s, a fiscal crisis of the state defined by negative public savings, broke up. This crisis, which was not resolved, led to the fall of public investments. As to private investments, they also have fallen as a percentage of GDP (when we compare with the 1970). They have fallen due to an action and an omission. The action was the mistaken adoption of growth with foreign indebtedness policy and the consequent excess of capital inflows. The omission was the suspension of the neutralization of the Dutch disease. Both resulted in a long-term overvaluation of the exchange rate and stopped industrialization. [ABSTRACT FROM AUTHOR]

This paper discusses the economic policies required to neutralize the Dutch disease—a long-term overvaluation of a national currency originated in the export of commodities—and the political economy involved. The difficulty in addressing this major market failure is associated with two political problems: the natural resource curse, the generalized rent-seeking that often takes over a commodity-exporting country, and exchange rate populism, the practice of keeping the currency overvalued, to ensure the reelection of politicians. While the two political problems have cultural and institutional roots that make them resilient to change, this paper shows that there is a relatively simple policy—a variable export tax on the commodities—that will make the currency competitive and therefore make it possible for the manufacturing industry to flourish. [ABSTRACT FROM AUTHOR]

The aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies. The first section focuses on the thought of the so-called pioneers of development economics, specifically their preference for protectionism and their belated recognition that an exchange rate policy could act as a substitute to it. In the second one, we analyse the origins of exchange rate scepticism. The third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short-run contractionary effects of a devaluation, reinforcing the scepticism in question. In the fourth section, we discuss the revival of development thinking in the 1980s and its discussion about East Asian trajectories, a literature that placed great emphasis on industrial policy. Finally, in the fifth section, we discuss the new historical facts and the new development macroeconomics models that are putting an end to exchange rate scepticism. [ABSTRACT FROM AUTHOR]

The majority of economic literature tends to discuss economic development issues by analysing the industrial policy and other long-term development policies separate from short-term macroeconomic policy. However, development strategies require a close coordination of the macroeconomic regime with the industrial policy. In addition to Brazil, our analytical discussion and normative implications can be addressed to other developing countries also facing premature deindustrialisation. We propose an analytical discussion of the phenomena of industrialisation, deindustrialisation and reindustrialisation, including a discussion on the connection between the macroeconomic regime and industrial policy, both oriented to reindustrialisation and catching up. The main point is that both policy regimes must be closely coordinated with each other. Concerning the macroeconomic regime, we argue that consistent monetary, fiscal, wage and exchange rate policies are those which are able to not only keep price stabilisation, but also provide average real interest rates below the average real return rates on capital, a competitive real exchange rate and real wage rates increasing in accordance with labour productivity growth. As for industrial policy, theoretical and empirical evidence suggest strategies aimed at the diversification of production, processes and products, especially within the manufacturing sector and within tradable segments of the service sector. [ABSTRACT FROM AUTHOR]

This paper presents an interpretation of the European crisis based on balance-of-payments imbalances within the Eurozone, highlighting the role of the “internal” real exchange rates as a primary cause of the crisis. It explores the structural contradictions that turn the euro into a “foreign currency” for each individual Eurozone country. These contradictions imply the inability of national central banks to monetize the public and private debts, which makes the euro crisis a sovereign crisis similar to those typical of emerging countries, but whose solution presents additional obstacles. [ABSTRACT FROM AUTHOR]

This paper revisits the original (2008) paper on the Dutch disease, which defined it by the existence of two exchange rate equilibriums (the current and the industrial exchange rate equilibriums). Its novelty is in claiming that, as we have a value and a market price for each good or service, we also have a value and a market price for foreign money. The value is the cost plus reasonable profit corresponding to the exchange rate that makes competitive the country's competent business enterprises; the nominal exchange rates floats around the value according to the demand and supply of foreign money. This basic distinction of the exchange rate in terms of value and in terms of price allows us to understand that the two equilibriums are defined in value terms, and opens room for a clear distinction of the policies that affect the value from the ones that affect the market price of the exchange rate. [ABSTRACT FROM AUTHOR]

This paper first presents some basic ideas and models of a structuralist development macroeconomics that complements and actualizes the ideas of the structuralist development economics that was dominant between the 1940s and the 1960s. A system of three models focusing on the exchange rate (the tendency to the cyclical overvaluation of the exchange rate, a critique of growth with foreign savings, and new a model of the Dutch disease) shows that it is not just volatile but chronically overvalued, and for that reason it is not just a macroeconomic problem; as a long term disequilibrium, it is in the core of development economics. Second, it summarizes "new developmentalism" - a sum of growth policies based on these models and on the experience of fast-growing Asian countries. [ABSTRACT FROM AUTHOR]

The article present a project proposal to the Ford Foundation which analyzes the financial instability and overvaluation of the exchange rate in Latin America, particularly Brazil. It mentions that the main objectives of the project is to explore the changes in the world economy and Latin America in consequence of the global financial crisis and the nature of financial crises. The relationship between financial instability, exchange rate an deindustrialization in Brazil is also tackled.

This is a personal account of the definition of "new developmentalism" - a national development strategy alternative to the Washington consensus -, and of a "structuralist development macroeconomics": the sum of models that justifies theoretically that strategy. It is personal account of a collective work involving Keynesian, institutionalist and structuralist economists in Brazil that are forming a new school of thought in Brazil: a Keynesian-structuralist school. It is Keynesian because it emphasizes the demand side or the investment opportunities' side of economic growth. It is institutionalist because institutions obviously matter in achieving growth and stability. It is structuralist because it defines economic development as a structural change from low to high value added per capita industries and because it is based on two structural tendencies that limit investment opportunities: the tendency of wages to grow below productivity and the tendency to the cyclical overvaluation of the exchange rate. [ABSTRACT FROM AUTHOR]

Structuralist development macroeconomics. This paper presents some basic ideas and models of a structuralist development macroeconomics (the tendencies to the overvaluation of the exchange rate and the tendency of wages to grow below productivity, the critique of growth with foreign savings, and a new model of the Dutch disease) that complement and actualize the thought of the Latin-American structuralist school that developed around ECLAC from the late 1940s to the 1960s. On the other hand, it suggests that a new national development strategy based on the experience of fast growing Asian countries is emerging; and argues that only the countries that adopt such strategy based on growth with domestic savings, fiscal and foreign trade responsibility and a competitive exchange rate will be able to catch up. [ABSTRACT FROM AUTHOR]

The adequate way of neutralizing the Dutch disease is the imposition of a variable tax on the export of the commodity that originates the disease. If such tax is equivalent to the "size" of the Dutch disease, it will shifts to the right its supply curve of the commodity in relation to the exchange rate, giving the existing domestic supply and the international demand, the exchange rate will depreciate at the value of the tax, and the equilibrium exchange rate will move from the "current" to the "industrial" equilibrium. [ABSTRACT FROM AUTHOR]