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Industrial policy and exchange rate skepticism

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  • 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 analyze the exchange rate skepticism that arises out of the theories that identify a foreign constraint to growth, in addition to the one revealed by the pioneers. 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 skepticism 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 skepticism.

Suggested Citation

  • Luiz Carlos Bresser-Pereira & Fernando Rugitsky, 2016. "Industrial policy and exchange rate skepticism," Working Papers, Department of Economics 2016_08, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2016wpecon8
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    References listed on IDEAS

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    1. Robert A. Blecker, 2016. "Wage-led versus profit-led demand regimes: the long and the short of it," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 373-390, October.
    2. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    3. Hirschman,Albert O., 1981. "Essays in Trespassing," Cambridge Books, Cambridge University Press, number 9780521282437, November.
    4. Luiz Carlos Bresser-Pereira & Yoshiaki Nakano, 2003. "Economic growth with foreign savings?," Brazilian Journal of Political Economy, Center of Political Economy, vol. 23(2), pages 163-188.
    5. Arslan Razmi, 2007. "The Contractionary Short-Run Effects of Nominal Devaluation in Developing Countries: Some Neglected Nuances," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(5), pages 577-602.
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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. 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.
    4. 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.

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    More about this item

    Keywords

    exchange rate; industrial policy; protectionism; East Asian countries.;
    All these keywords.

    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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