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On the role of the exchange rate as a tool for industrial competitiveness

Author

Listed:
  • Ariel Dvoskin
  • Germán David Feldman
  • Guido Ianni

Abstract

By means of a two-tradable-sector model for an open, price-taking economy inspired by the Classical-Sraffian tradition, which conceives the pattern of trade as a technicalchoice problem, we examine some difficulties with the recourse to exchange-rate policy as a tool to promote sectorial competitiveness. To this aim, we distinguish among economies that only produce manufactures from those in which the most profitable sector exploits natural resources under conditions of differential rent. We show that, when both tradable sectors produce industrial goods, conventional devaluation does not generally allow one domestic sector to reach international competitiveness without damaging the other. While when the prevailing sector operates under conditions of differential rent, even though the development of a new sector – by setting the exchange rate at its “industrial-equilibrium” level – is possible, this requires that the policymaker determines the effect of changes in the exchange rate, both in direction and magnitude, on the other distributive variables. JEL Cl;assification: B22; E11; F43.

Suggested Citation

  • Ariel Dvoskin & Germán David Feldman & Guido Ianni, 2020. "On the role of the exchange rate as a tool for industrial competitiveness," Brazilian Journal of Political Economy, Center of Political Economy, vol. 40(2), pages 310-331.
    • Handle: RePEc:ekm:repojs:v:40:y:2020:i:2:p:310-331:id:691
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    Citations

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    Cited by:

    1. Abdallah, Ali, 2022. "Dépréciation réelle de la monnaie et croissance économique [Can real currency depreciation lead growth?]," MPRA Paper 113183, University Library of Munich, Germany.
    2. Dvoskin, Ariel & Ianni, Guido, 2021. "Produced means of production and the chain of comparative advantages," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 635-647.

    More about this item

    Keywords

    Classical approach to prices and distribution; differential rent; exchange rate policy; industrial equilibrium; sectorial competitiveness;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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