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Profit margins, exchange rates and structural change: empirical evidences for the period 1996-2017

Author

Listed:
  • Nelson Marconi
  • Guilherme Magacho
  • João Guilherme R. Machado
  • Rafael de Azevedo Ramires Leão

Abstract

This research seeks to understand the relationship between the rate of profit and the exchange rate and how this relationship can impact the productive structure. We construct a theoretical model in which the exchange rate influences the rate of profit, and we argue that although an overvalued exchange rate could benefit sectors with high imported input coefficients in the short term because it reduces costs, it negatively impacts the demand for their products and also reduces the aggregatedemand; hence, an overvalued exchange rate could shrink the profit rate of these sectors in the medium term. In the Brazilian case, these sectors are the high technological-content manufacturing sectors. JEL Classification: F41; F63; L16; O11; O14.

Suggested Citation

  • Nelson Marconi & Guilherme Magacho & João Guilherme R. Machado & Rafael de Azevedo Ramires Leão, 2020. "Profit margins, exchange rates and structural change: empirical evidences for the period 1996-2017," Brazilian Journal of Political Economy, Center of Political Economy, vol. 40(2), pages 285-309.
    • Handle: RePEc:ekm:repojs:v:40:y:2020:i:2:p:285-309:id:690
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    File URL: https://centrodeeconomiapolitica.org.br/repojs/index.php/journal/article/view/690/680
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    Cited by:

    1. Porcile, Gabriel & Sartorello Spinola, Danilo & Yajima, Giuliano, 2020. "Patterns of growth in structuralist models: The role of the real exchange rate and industrial policy," MERIT Working Papers 2020-027, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    Profit-Margins; Exchange Rate; Investment; New Developmentalism; Deindustrialization; Manufacturing; Structural Change;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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