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Deindustrialization, economic complexity and exchange rate overvaluation: the case of Brazil (1998-2017)

Author

Listed:
  • JosŽ Luis Oreiro

    (Universidade de Bras’lia CNPq and Center for Studies of New Developmentalism)

  • Luciano Luiz Manarin

    (Instituto Federal do Paran‡)

  • Paulo Gala

    (Funda ‹o Getœlio Vargas)

Abstract

We analyze the determinants of the deindustrialization of the Brazilian economy in the period between 1998 and 2017. This is a typical example of Ôpremature deindustrializationÕ in the sense that the major reason for the fall in the manufacturing share has not been the increase in per-capita income but rather real exchange rate overvaluation. In the Brazilian case, real exchange rate overvaluation results both from an appreciation of the real effective exchange rate, and an increase in the equilibrium value of the real exchange rate, the Òindustrial equilibrium exchange rateÓ of the new developmentalist literature. The elimination of the real exchange rate overvaluation requires not only the adoption of a macroeconomic policy regime in which some kind of real exchange rate targeting is adopted, but also industrial policies designed for increasing the economic complexity of the Brazilian economy and, hence, to reduce the equilibrium value of the real exchange rate.

Suggested Citation

  • JosŽ Luis Oreiro & Luciano Luiz Manarin & Paulo Gala, 2020. "Deindustrialization, economic complexity and exchange rate overvaluation: the case of Brazil (1998-2017)," PSL Quarterly Review, Economia civile, vol. 73(295), pages 313-341.
    • Handle: RePEc:psl:pslqrr:2020:43
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    References listed on IDEAS

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    Cited by:

    1. Marcos A. L. de Campos & Jose Luis Oreiro & Kalinka Martins da Silva, 2024. "The impact of trade liberalisation and exchange rate undervaluation on exports, imports, and trade balance of Latin American countries (1970-2019)," Working Papers PKWP2408, Post Keynesian Economics Society (PKES).
    2. Jose Luis da Costa Oreiro & Stefan Wilson d'Amato & Luciano Luiz Manarin D'Agostini & Paulo Sergio de Oliveira Simoes Gala, 2022. "Measuring the technological backwardness of middle-and low-income countries: The employment quality gap and its relationship with the per capita income gap," PSL Quarterly Review, Economia civile, vol. 75(301), pages 139-159.
    3. Jose Luis Oreiro, 2024. "Class Coalition and the Political Economy of New Developmentalism: an essay in honour of Bresser-Pereira," Working Papers PKWP2411, Post Keynesian Economics Society (PKES).
    4. Basil Oberholzer, 2021. "Managing commodity booms: Dutch disease and economic performance," PSL Quarterly Review, Economia civile, vol. 74(299), pages 307-323.
    5. Hugo Iasco-Pereira & Fabricio José Missio, 2022. "Would a competitive real exchange rate be a driver of economic prosperity?," PSL Quarterly Review, Economia civile, vol. 75(303), pages 355-383.

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    More about this item

    Keywords

    premature deindustrialization; exchange rate overvaluation; Brazilian economy;
    All these keywords.

    JEL classification:

    • 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
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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