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Industrial policy and exchange rate scepticism
[Open economy models of distribution and growth]

Author

Listed:
  • Luiz Carlos Bresser-Pereira
  • Fernando Rugitsky

Abstract

The aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies. The first section focuses on the thought of the so-called pioneers of development economics, specifically their preference for protectionism and their belated recognition that an exchange rate policy could act as a substitute to it. In the second one, we analyse the origins of exchange rate scepticism. The third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short-run contractionary effects of a devaluation, reinforcing the scepticism in question. In the fourth section, we discuss the revival of development thinking in the 1980s and its discussion about East Asian trajectories, a literature that placed great emphasis on industrial policy. Finally, in the fifth section, we discuss the new historical facts and the new development macroeconomics models that are putting an end to exchange rate scepticism.

Suggested Citation

  • Luiz Carlos Bresser-Pereira & Fernando Rugitsky, 2018. "Industrial policy and exchange rate scepticism [Open economy models of distribution and growth]," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 42(3), pages 617-632.
    • Handle: RePEc:oup:cambje:v:42:y:2018:i:3:p:617-632.
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    File URL: http://hdl.handle.net/10.1093/cje/bex004
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    Cited by:

    1. Fernando Rugitsky, 2017. "The rise and fall of the Brazilian economy (2004-2015): the economic antimiracle," Working Papers, Department of Economics 2017_29, University of São Paulo (FEA-USP).
    2. Cícero, Vinicius Curti & Lima, Gilberto Tadeu, 2023. "Functional distribution of income as a determinant of importing behavior: An empirical analysis," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 393-405.
    3. Raza, Werner, 2024. "Towards a progressive industrial policy for the twin transformation in the European Union: Synthesis report," Research Reports 21/2025, Austrian Foundation for Development Research (ÖFSE).
    4. Firat Demir & Arslan Razmi, 2022. "The Real Exchange Rate And Development Theory, Evidence, Issues And Challenges," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 386-428, April.
    5. Wolf, Christina, 2023. "Demand-growth in support of structural change: Evidence from Nigeria's formal manufacturing sector," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 347-358.

    More about this item

    Keywords

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    JEL classification:

    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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