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Patterns of growth in structuralist models: The role of the real exchange rate and industrial policy

Author

Listed:
  • Porcile, Gabriel

    (ECLAC and UFPR)

  • Sartorello Spinola, Danilo

    (UNU-MERIT, Maastricht University)

  • Yajima, Giuliano

    (Department of Social Sciences and Economics, Sapienza University of Rome.)

Abstract

This paper presents a Balance-of-payments (BOP)-constrained growth model in which the interaction between the real exchange rate (RER) policy and industrial policy result in the emergence of different patterns of growth and income distribution. The paper relies on cumulative causation à la Kaldor and path-dependency to relate both types of policies. The transition from one equilibrium level of the RER to a new equilibrium level generates a process of learning that transforms the income elasticity of exports and hence the BOP-constrained rate of growth in the long run. The model produces a variety of outcomes that help explain the contradictory results that emerge from the empirical literature on the impact of the real exchange rate on economic growth in the long run.

Suggested Citation

  • 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).
    • Handle: RePEc:unm:unumer:2020027
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    More about this item

    Keywords

    Real Exchange Rate; Structural Change; Growth models; Structuralist models; Balance-of payments; BOP-constrained growth; Industrial policy;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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