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New Developmentalism: beyond competitive exchange rate

Author

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  • José Luis Oreiro

    (Associate Professor at Department of Economics, Universidade de Brasília, Brasília/DF, Brasil.)

Abstract

The aim of this article is to show that the achievement of a competitive level for real exchange rate is a necessary, although not sufficient condition for the catching-up of middle-income countries to developed countries. It is also required a change in the long-term expectations of real exchange rate by entrepreneurs which requires the elimination of the underlying causes of the tendency of overvaluation of real exchange rate, that encompass the Dutch Disease and capital account liberalization. Due to the existence of technological gap, industrial equilibrium exchange rate in middle-income countries may be higher enough to compensate domestic firms for their technological backwardness relative to firms of developed countries. This means that there is a space for Industrial and Science and Technology Policies in the New-Developmentalist theoretical framework. JEL Classification: O11; O25; O40.

Suggested Citation

  • José Luis Oreiro, 2020. "New Developmentalism: beyond competitive exchange rate," Brazilian Journal of Political Economy, Center of Political Economy, vol. 40(2), pages 238-242, April.
    • Handle: RePEc:ekm:repojs:v:40:y:2020:i:2:id:95094
    DOI: 10.1590/0101-31572020-3138
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    Keywords

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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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