IDEAS home Printed from https://ideas.repec.org/p/unm/unumer/2020027.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://unu-merit.nl/publications/wppdf/2020/wp2020-027.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Berg, Andrew & Ostry, Jonathan D. & Zettelmeyer, Jeromin, 2012. "What makes growth sustained?," Journal of Development Economics, Elsevier, vol. 98(2), pages 149-166.
    2. John McCombie & Maurizio Pugno & Bruno Soro (ed.), 2002. "Productivity Growth and Economic Performance," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-50423-3, October.
    3. McMillan, Margaret & Rodrik, Dani & Verduzco-Gallo, Íñigo, 2014. "Globalization, Structural Change, and Productivity Growth, with an Update on Africa," World Development, Elsevier, vol. 63(C), pages 11-32.
    4. Ribeiro, Rafael S.M. & McCombie, John S.L. & Lima, Gilberto Tadeu, 2020. "Does real exchange rate undervaluation really promote economic growth?," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 408-417.
    5. Mario Cimoli & Gabriel Porcile, 2014. "Technology, structural change and BOP-constrained growth: a structuralist toolbox," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(1), pages 215-237.
    6. Mart�n Rapetti & Peter Skott & Arslan Razmi, 2012. "The real exchange rate and economic growth: are developing countries different?," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(6), pages 735-753, April.
    7. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
    8. Luciano Boggio & Laura Barbieri, 2017. "International competitiveness in post-Keynesian growth theory: controversies and empirical evidence," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 41(1), pages 25-47.
    9. Mark Setterfield (ed.), 2002. "The Economics of Demand-Led Growth," Books, Edward Elgar Publishing, number 1864.
    10. 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.
    11. Krugman, Paul & Taylor, Lance, 1978. "Contractionary effects of devaluation," Journal of International Economics, Elsevier, vol. 8(3), pages 445-456, August.
    12. Mark Setterfield, 2012. "The Remarkable Durability of Thirlwall’s Law," Palgrave Macmillan Books, in: Elias Soukiazis & Pedro A. Cerqueira (ed.), Models of Balance of Payments Constrained Growth, chapter 3, pages 83-110, Palgrave Macmillan.
    13. Luciano Ferreira Gabriel & Luiz Carlos De Santana Ribeiro & Frederico Gonzaga Jayme Jr. & Jose Luis Oreiro, 2020. "Manufactoring, economic growth, and real exchange rate: Empirical evidence in panel data and input-output multipliers," PSL Quarterly Review, Economia civile, vol. 73(292), pages 51-75.
    14. Gabriel Porcile & Danilo Sartorello Spinola, 2018. "Natural, Effective and BOP-Constrained Rates of Growth: Adjustment Mechanisms and Closure Equations," PSL Quarterly Review, Economia civile, vol. 71(285), pages 139-160.
    15. Flavio Vilela Vieira & Ronald MacDonald, 2016. "Exchange rate volatility and exports: a panel data analysis," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 43(2), pages 203-221, May.
    16. Fabrício J. Missio & Frederico G. Jayme Jr. & Gustavo Britto & José Luis Oreiro, 2015. "Real Exchange Rate and Economic Growth: New Empirical Evidence," Metroeconomica, Wiley Blackwell, vol. 66(4), pages 686-714, November.
    17. Rafael Saulo Marques Ribeiro & John S.L. McCombie & Gilberto Tadeu Lima, 2017. "A reconciliation proposal of demand-driven growth models in open economies," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(2), pages 226-244, May.
    18. Nelson, Richard R. & Sampat, Bhaven N., 2001. "Making sense of institutions as a factor shaping economic performance," Journal of Economic Behavior & Organization, Elsevier, vol. 44(1), pages 31-54, January.
    19. Carlos F. Diaz-Alejandro, 1986. "The Early 1980s in Latin America: The 1930s One More Time?," Palgrave Macmillan Books, in: Sanjaya Lall & Frances Stewart (ed.), Theory and Reality in Development, chapter 10, pages 154-164, Palgrave Macmillan.
    20. Gilberto Lima & Gabriel Porcile, 2013. "Economic growth and income distribution with heterogeneous preferences on the real exchange rate," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(4), pages 651-674.
    21. Ariel Dvoskin & Germán David Feldman & Guido Ianni, 2020. "New‐structuralist exchange‐rate policy and the pattern of specialization in Latin American countries," Metroeconomica, Wiley Blackwell, vol. 71(1), pages 22-48, February.
    22. F. V. Vieira & M. Holland & C. Gomes da Silva & L. C. Bottecchia, 2013. "Growth and exchange rate volatility: a panel data analysis," Applied Economics, Taylor & Francis Journals, vol. 45(26), pages 3733-3741, September.
    23. Carlos Aguiar de Medeiros, 2020. "A Structuralist and Institutionalist developmental assessment of and reaction to New Developmentalism," Review of Keynesian Economics, Edward Elgar Publishing, vol. 8(2), pages 147-167, April.
    24. Rafael S. M. Ribeiro & John S. L. McCombie & Gilberto Tadeu Lima, 2016. "Exchange Rate, Income Distribution and Technical Change in a Balance-of-Payments Constrained Growth Model," Review of Political Economy, Taylor & Francis Journals, vol. 28(4), pages 545-565, October.
    25. Marconi, Nelson & Reis, Cristina Fróes de Borja & Araújo, Eliane Cristina de, 2016. "Manufacturing and economic development: The actuality of Kaldor's first and second laws," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 75-89.
    26. Dutt, Amitava Krishna, 1992. "A Kaldorian Model of Growth and Development Revisited: Comment," Oxford Economic Papers, Oxford University Press, vol. 44(1), pages 156-168, January.
    27. Mustafa Caglayan & Firat Demir, 2019. "Exchange rate movements, export sophistication and direction of trade: the development channel and North–South trade flows," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(6), pages 1623-1652.
    28. Carlos A. Ibarra & Robert A. Blecker, 2016. "Structural change, the real exchange rate and the balance of payments in Mexico, 1960–2012," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(2), pages 507-539.
    29. Frenkel, Roberto & Ros, Jaime, 2006. "Unemployment and the real exchange rate in Latin America," World Development, Elsevier, vol. 34(4), pages 631-646, April.
    30. Araujo, Ricardo Azevedo, 2013. "Cumulative causation in a structural economic dynamic approach to economic growth and uneven development," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 130-140.
    31. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2007. "A structural economic dynamics approach to balance-of-payments-constrained growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 31(5), pages 755-774, September.
    32. Lee,Keun, 2013. "Schumpeterian Analysis of Economic Catch-up," Cambridge Books, Cambridge University Press, number 9781107042681, January.
    33. 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.
    34. Mario Cimoli & Sebastian Fleitas & Gabriel Porcile, 2013. "Technological intensity of the export structure and the real exchange rate," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 22(4), pages 353-372, June.
    35. André Nassif & Carmem Feijó & Eliane Araújo, 2015. "Structural change and economic development: is Brazil catching up or falling behind?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1307-1332.
    36. Blecker, Robert A, 1989. "International Competition, Income Distribution and Economic Growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 13(3), pages 395-412, September.
    37. Mario Cimoli & Gabriel Porcile & Sebastián Rovira, 2010. "Structural change and the BOP-constraint: why did Latin America fail to converge?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 34(2), pages 389-411, March.
    38. Nucci, Francesco & Pozzolo, Alberto F., 2001. "Investment and the exchange rate: An analysis with firm-level panel data," European Economic Review, Elsevier, vol. 45(2), pages 259-283, February.
    39. Servaas Storm & C.W.M. Naastepad, 2015. "Crisis and Recovery in the German Economy: The Real Lessons," Working Papers Series 10, Institute for New Economic Thinking.
    40. P. J. Verdoorn, 2002. "Factors that Determine the Growth of Labour Productivity," Palgrave Macmillan Books, in: John McCombie & Maurizio Pugno & Bruno Soro (ed.), Productivity Growth and Economic Performance, chapter 2, pages 28-36, Palgrave Macmillan.
    41. Bengt-Åke Lundvall, 2017. "The Learning Economy and the Economics of Hope," Globelics Working Paper Series 2017-06, Globelics - Global Network for Economics of Learning, Innovation, and Competence Building Systems, Aalborg University, Department of Business and Management.
    42. Storm, Servaas & Naastepad, C.W.M., 2015. "Crisis and recovery in the German economy: The real lessons," Structural Change and Economic Dynamics, Elsevier, vol. 32(C), pages 11-24.
    43. Mark Setterfield & John Cornwall, 2002. "A Neo-Kaldorian Perspective on the Rise and Decline of the Golden Age," Chapters, in: Mark Setterfield (ed.), The Economics of Demand-Led Growth, chapter 5, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Porcile, Gabriel & Spinola, Danilo & Yajima, Giuliano, 2021. "Patterns of Growth in Structuralist Models: The Role of PoliticalEconomy," CAFE Working Papers 12, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    2. Robert A. Blecker, 2022. "New advances and controversies in the framework of balance‐of‐payments‐constrained growth," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 429-467, April.
    3. Guilherme R. Magacho & John S. L. McCombie, 2020. "Structural change and cumulative causation: A Kaldorian approach," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 633-660, July.
    4. Dávila-Fernández, Marwil & Oreiro, José, 2021. "A song of ice and fire: Competitiveness in an export-led growing economy," MPRA Paper 109821, University Library of Munich, Germany.
    5. Gabriel Porcile & Danilo Sartorello Spinola, 2018. "Natural, Effective and BOP-Constrained Rates of Growth: Adjustment Mechanisms and Closure Equations," PSL Quarterly Review, Economia civile, vol. 71(285), pages 139-160.
    6. 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.
    7. Palazzo, Gabriel & Rapetti, Martín, 2023. "From macro to micro and macro back: Macroeconomic trade elasticities in a developing economy," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 223-252.
    8. Missio, Fabricio & Araujo, Ricardo Azevedo & Jayme, Frederico G., 2017. "Endogenous elasticities and the impact of the real exchange rate on structural economic dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 42(C), pages 67-75.
    9. 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.
    10. Marwil J. Dávila-Fernández & Serena Sordi, 2021. "Thirlwall's law: Binding-constraint or centre-of-gravity? A possible Kaleckian solution," Department of Economics University of Siena 853, Department of Economics, University of Siena.
    11. Gabriel Porcile & Giuliano Toshiro Yajima, 2019. "New Structuralism and the balance-ofpayments constraint," Review of Keynesian Economics, Edward Elgar Publishing, vol. 7(4), pages 517-536, October.
    12. Giuliano Toshiro Yajima & Lorenzo Nalin, 2022. "Financial Barriers to Structural Change in Developing Economies: A Theoretical Framework," Economics Working Paper Archive wp_1004, Levy Economics Institute.
    13. Dávila-Fernández, Marwil J. & Oreiro, José L. & Dávila Dávila, Mario W., 2018. "Endogenizing non-price competitiveness in a BoPC growth model with capital accumulation," Structural Change and Economic Dynamics, Elsevier, vol. 44(C), pages 77-87.
    14. Araujo, Ricardo Azevedo, 2013. "Cumulative causation in a structural economic dynamic approach to economic growth and uneven development," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 130-140.
    15. Fabrício J. Missio & Frederico G. Jayme Jr. & Gustavo Britto & José Luis Oreiro, 2015. "Real Exchange Rate and Economic Growth: New Empirical Evidence," Metroeconomica, Wiley Blackwell, vol. 66(4), pages 686-714, November.
    16. Araujo, Ricardo Azevedo & Teixeira, Joanilio Rodolpho, 2021. "An appraisal of neo-Kaldorian theories from a structural economic dynamics perspective," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 247-255.
    17. Abdallah, Ali, 2022. "Dépréciation réelle de la monnaie et croissance économique [Can real currency depreciation lead growth?]," MPRA Paper 113183, University Library of Munich, Germany.
    18. Douglas Alencar & Frederico G. Jayme Jr & Gustavo Britto, 2021. "A post-Kaleckian model with productivity growth and real exchange rate applied to selected Latin American countries," PSL Quarterly Review, Economia civile, vol. 74(297), pages 127-146.
    19. 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.
    20. Ribeiro, Rafael S.M. & McCombie, John S.L. & Lima, Gilberto Tadeu, 2020. "Does real exchange rate undervaluation really promote economic growth?," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 408-417.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unm:unumer:2020027. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ad Notten (email available below). General contact details of provider: https://edirc.repec.org/data/meritnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.