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The production structure, exchange rate preferences and the short-run—Medium-run macrodynamics

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  • Cimoli, Mario
  • Lima, Gilberto Tadeu
  • Porcile, Gabriel

Abstract

This paper focuses on the role of the production structure in shaping output shares, wage bargaining and the dynamics of the real exchange rate in a Neo-Kaleckian macroeconomic model. While changes in the rate of capital utilization ensure the short-run equilibrium, in the medium run the real exchange rate must adjust to stabilize the labor market and the external sector. Interestingly, these variables define a trilemma in which it is not possible for workers to have their desired wage share, for firms to have their desired profit share in output and for the economy to have a stable deficit in current account to GDP ratio at the same time. Structural change allows for a way out of the trilemma as it makes possible a higher wage share for a given profit share with external equilibrium. The corollary is that distribution and high employment cannot be sustained solely by conventional fiscal and monetary policies: they also require industrial and technological policies that redefine the structural parameters of the system, as a form of reconciling conflicting claims with external equilibrium.

Suggested Citation

  • Cimoli, Mario & Lima, Gilberto Tadeu & Porcile, Gabriel, 2016. "The production structure, exchange rate preferences and the short-run—Medium-run macrodynamics," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 13-26.
    • Handle: RePEc:eee:streco:v:37:y:2016:i:c:p:13-26
    DOI: 10.1016/j.strueco.2015.11.006
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    Cited by:

    1. Ganguly, Arpan & Spinola, Danilo, 2024. "Growth and distribution regimes under global value chains: Diversification, integration, and uneven development," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 634-649.
    2. Dávila-Fernández, Marwil J. & Oreiro, José L. & Dávila Dávila, Mario W., 2018. "Endogenizing non-price competitiveness in a BoPC growth model with capital accumulation," Structural Change and Economic Dynamics, Elsevier, vol. 44(C), pages 77-87.
    3. Luìs, Galindo & Giulio, Guarini & Gabriel, Porcile, 2020. "Environmental innovations, income distribution, international competitiveness and environmental policies: a Kaleckian growth model with a balance of payments constraint," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 16-25.
    4. Oreiro, José L. & da Silva, Kalinka M. & Dávila-Fernández, Marwil J., 2020. "A New Developmentalist model of structural change, economic growth and middle-income traps," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 26-38.
    5. Spinola, Danilo, 2020. "Uneven development and the balance of payments constrained model: Terms of trade, economic cycles, and productivity catching-up," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 220-232.
    6. Palazzo, Gabriel & Rapetti, Martín, 2023. "From macro to micro and macro back: Macroeconomic trade elasticities in a developing economy," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 223-252.
    7. Sartorello Spinola, Danilo, 2020. "Debating the assumptions of the Thirlwall Model: A VECM analysis of the Balance of Payments for Argentina, Brazil, Colombia, and Mexico," MERIT Working Papers 2020-001, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    8. Calzada, BCO & Spinola, Danilo, 2024. "Determinants of Export Diversification in Resource-Dependent Economies: The Role of Product Relatedness and Macroeconomic Conditions," CAFE Working Papers 30, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.

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    More about this item

    Keywords

    Economic growth; Income distribution; Real exchange rate; Structural change; Growth and income distribution; BOP-dominated macrodynamics;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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