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Economic Integration, Sectoral Diversification, and Exchange Rate Policy in a Developing Economy

  • Gabriel Srour
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    The paper develops a simple three-sector model of a developing country with nominal wage rigidity, in which one sector is thought of as the primary sector and the other two are sectors in which the country can diversify. The paper then analyzes the relationship between the market structure of the nonprimary sectors and equilibrium adjustments to shocks in the primary sector. In particular, the paper examines under what conditions the country should promote one nonprimary sector over another. Among other things, it argues that developing countries should promote those sectors that are more integrated with the outside world

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=17302
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/60.

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    Length: 31
    Date of creation: 01 Apr 2004
    Date of revision:
    Handle: RePEc:imf:imfwpa:04/60
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    1. Maurice Obstfeld., 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," Center for International and Development Economics Research (CIDER) Working Papers C01-121, University of California at Berkeley.
    2. Maurice Obstfeld & Kenneth Rogoff, 1994. "Exchange Rate Dynamics Redux," NBER Working Papers 4693, National Bureau of Economic Research, Inc.
    3. Tille, Cedric, 2001. "The role of consumption substitutability in the international transmission of monetary shocks," Journal of International Economics, Elsevier, vol. 53(2), pages 421-444, April.
    4. Paul Cashin & Hong Liang & C. John McDermott, 2000. "How Persistent Are Shocks to World Commodity Prices?," IMF Staff Papers, Palgrave Macmillan, vol. 47(2), pages 2.
    5. Jordi Galí & Tommaso Monacelli, 2004. "Monetary policy and exchange rate volatility in a small open economy," Economics Working Papers 835, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Hali J. Edison & Michael W. Klein & Luca Antonio Ricci & Torsten Sløk, 2004. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 2.
    7. Paul Cashin & C John McDermott & Alasdair Scott, 1999. "Booms and slumps in world commodity prices," Reserve Bank of New Zealand Discussion Paper Series G99/8, Reserve Bank of New Zealand.
    8. Corsetti, Giancarlo & Pesenti, Paolo, 2002. "Self-Validating Optimum Currency Areas," CEPR Discussion Papers 3220, C.E.P.R. Discussion Papers.
    9. David Bowman & Brian M. Doyle, 2003. "New Keynesian, open-economy models and their implications for monetary policy," International Finance Discussion Papers 762, Board of Governors of the Federal Reserve System (U.S.).
    10. Collier, Paul & Dehn, Jan, 2001. "Aid, shocks, and growth," Policy Research Working Paper Series 2688, The World Bank.
    11. Richard Clarida & Jordi Gali & Mark Gertler, 2001. "Optimal Monetary Policy in Open versus Closed Economies: An Integrated Approach," American Economic Review, American Economic Association, vol. 91(2), pages 248-252, May.
    12. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
    13. Knight, Malcolm, 1998. "Developing Countries and the Globalization of Financial Markets," World Development, Elsevier, vol. 26(7), pages 1185-1200, July.
    14. Paul Cashin & C. John McDermott, 2001. "The Long-Run Behavior of Commodity Prices; Small Trends and Big Variability," IMF Working Papers 01/68, International Monetary Fund.
    15. Malcolm D. Knight, 1998. "Developing Countries and the Globalization of Financial Markets," IMF Working Papers 98/105, International Monetary Fund.
    16. Michael B. Devereux & Charles Engel, 1998. "Fixed vs. Floating Exchange Rates: How Price Setting Affects the Optimal Choice of Exchange-Rate Regime," NBER Working Papers 6867, National Bureau of Economic Research, Inc.
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