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Profit margins, exchange rates and structural change: empirical evidences for the period 1996-2017

Author

Listed:
  • Nelson Marconi

    (Assistant Professor at Escola de Administração de Empresas de São Paulo da Fundação Getulio Vargas – EAESP-FGV, São Paulo/SP, Brasil.)

  • Guilherme Magacho

    (Visiting Professor at Universidade Federal do ABC – UFABC,Santo André/SP, Brasil.)

  • João Guilherme R. Machado

    (PhD Candidate in Public Administration/Escola de Administração de Empresas de São Paulo da Fundação Getulio Vargas – EAESP-FGV, São Paulo/SP, Brasil.)

  • Rafael de Azevedo Ramires Leão

    (PhD Candidate in Public Administration/ Escola de Administração de Empresas de São Paulo da Fundação Getulio Vargas – EAESP-FGV, São Paulo/SP, Brasil.)

Abstract

This research seeks to understand the relationship between the rate of profit and the exchange rate and how this relationship can impact the productive structure. We construct a theoretical model in which the exchange rate influences the rate of profit, and we argue that although an overvalued exchange rate could benefit sectors with high imported input coefficients in the short term because it reduces costs, it negatively impacts the demand for their products and also reduces the aggregatedemand; hence, an overvalued exchange rate could shrink the profit rate of these sectors in the medium term. In the Brazilian case, these sectors are the high technological-content manufacturing sectors. JEL Classification: F41; F63; L16; O11; O14.

Suggested Citation

  • Nelson Marconi & Guilherme Magacho & João Guilherme R. Machado & Rafael de Azevedo Ramires Leão, 2020. "Profit margins, exchange rates and structural change: empirical evidences for the period 1996-2017," Brazilian Journal of Political Economy, Center of Political Economy, vol. 40(2), pages 285-309, April.
    • Handle: RePEc:ekm:repojs:v:40:y:2020:i:2:id:95097
    DOI: 10.1590/0101-31572020-3093
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    Keywords

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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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