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A note on the political economy of exchange rates in Argentina: new and classical developmentalism re-evaluated

Author

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  • Alejandro Fiorito
  • Matías Vernengo

Abstract

The paper develops a model in which the relation between the real exchangerate and the real wage, in the context of conflictive income distribution, is made explicit. It isnoted that the central bank tries to regulate the distributive relation exchange rate and realwages through the changes in the interest rate. The theoretical point is that, under certaincircumstances, a relatively depreciated or high level of the real exchange rate might reducereal wages and have a negative impact on economic growth. The paper also provides someevidence for the Argentine case, and suggests that the Classical Developmentalist elasticitypessimism seems, in the case of Argentina, to be validated. Also, the use of the exchangerate as an instrument to bolster redistribution away from the working class, and to promoteinvestment and growth is also not born in the data. JEL Classification: O11; F31; O54.

Suggested Citation

  • Alejandro Fiorito & Matías Vernengo, 2022. "A note on the political economy of exchange rates in Argentina: new and classical developmentalism re-evaluated," Brazilian Journal of Political Economy, Center of Political Economy, vol. 42(4), pages 835-852.
    • Handle: RePEc:ekm:repojs:v:42:y:2022:i:4:p:835-852:id:2366
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    More about this item

    Keywords

    Economic development; exchange rate; Argentina;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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