A reconstrução da indústria brasileira: a conexão entre o regime macroeconômico e a política industrial

The majority of economic literature tends to discuss economic development issues by analysing the industrial policy and other long-term development policies separate from short-term macroeconomic policy. However, development strategies require a close coordination of the macroeconomic regime with the industrial policy. In addition to Brazil, our analytical discussion and normative implications can be addressed to other developing countries also facing premature deindustrialisation. We propose an analytical discussion of the phenomena of industrialisation, deindustrialisation and reindustrialisation, including a discussion on the connection between the macroeconomic regime and industrial policy, both oriented to reindustrialisation and catching up. The main point is that both policy regimes must be closely coordinated with each other. Concerning the macroeconomic regime, we argue that consistent monetary, fiscal, wage and exchange rate policies are those which are able to not only keep price stabilisation, but also provide average real interest rates below the average real return rates on capital, a competitive real exchange rate and real wage rates increasing in accordance with labour productivity growth. As for industrial policy, theoretical and empirical evidence suggest strategies aimed at the diversification of production, processes and products, especially within the manufacturing sector and within tradable segments of the service sector.

Problem/Relevance: Investigation of exchange rate behaviour has been an important topic in international monetary economics because of the impact of exchange rates on economies. One strand of the literature has focused on explaining the observed movement of the nominal or real exchange rate in terms of macroeconomic variables. Another strand of the literature has evaluated the behaviour of the real exchange rates in relation to the equilibrium exchange rate, which is the real exchange rate that is consistent with macroeconomic balances. Albania implements a free floating exchange rate regime; therefore, evaluating whether the actual real exchange rate is too strong or too weak compared with the real equilibrium exchanges rate has great relevance for the Albanian economy. Research Objective/Questions: Generally, the real exchange rate is defined as the nominal exchange rate adjusted for the relative price differential between domestic and foreign goods and services. So, an appreciation of the nominal exchange rate or higher inflation at home relative to other countries may lead to an appreciation of the real exchange rate. Such appreciation weakens the competitiveness of a country, widens the current account deficit and increases vulnerability to financial crises. The opposite holds true when the real exchange rate depreciates. The aim of this paper is, first, to estimate the equilibrium real exchange rate for the Albanian currency against the euro and, second, to assess the total exchange rate misalignment during the period of 2001Q1-2017Q1. Thus, the equilibrium real exchange rate is used as a benchmark for evaluating the misalignment of the actual real exchange rate. Methodology: This paper explores the determinants of the real exchange rate for Albania, during the period of 2001Q1-2017Q1, based on the stock-flow approach, the so called Behavioural Equilibrium Exchange Rate (BEER), which effectively employs reduced-form modelling of the exchange rate based on standard co-integration techniques. The stock of net foreign assets and productivity changes has been considered fundamental for the real exchange rate. We have used the Johansen co integration technique to test the existence of long-run relationships between our main variables and to evaluate the path of the equilibrium real exchange rate based on vector error correction model (VECM) results. Then the analysis is completed by calculating the degree of misalignment as the difference between the actual real exchange rate and the equilibrium real exchange rate. Major Findings: Based on the Johansen co-integration approach, we find one long-run relationship between the real exchange rate of the Albanian lek against the euro, relative productivity and net foreign assets during the period of 2001Q1 to 2017Q1. The model implies that the real exchange rate is affected, as we expected, by relative productivity and net foreign assets, confirming that an increase in both variables leads to an appreciation of the real exchange rate in the long run. Our results show that the behaviour of the actual real exchange rate is similar to the path of the equilibrium exchange rate and that the degree of misalignment throughout the period is estimated to be moderate. Implications: Our empirical results confirm that the degree of misalignment is reasonable, suggesting a consistency between macroeconomic (especially monetary) policies and the free floating exchange rate regime. Assessing real exchange rate misalignment is a very important issue for policy makers because of the severe welfare and efficiency costs that such misalignment can have for an economy.

Economic literature shows evidence that a competitive real exchange rate (RER), i.e., slightly undervalued, is key for development in developing countries. This paper discusses the connections between inflation targeting (IT) regimes and RER trends in economies highly open to capital flows. Following Rodrik’s (2008. The real exchange rate and economic growth, Brookings Papers on Economic Activity, Washington, 2008, vol. 39, no. 2 (Fall), 365–439), the RER trend is estimated for a sample of 31 out of the 38 developed and developing countries that, by the final year of the period covered in this study (2019), had already adopted IT. Covering the period 2000–2019, we showed that all developed and Latin American developing countries had an RER overvaluation trend, while the European, Asian and African (South Africa) developing countries registered an undervaluation trend in the same period. Through a dynamic panel data model, we tested and validated the following hypotheses, which, to the best of our knowledge, are a seminal contribution. We found in Latin American developing countries, whose ITs are centred on the main objective of pursuing price stability, the RER overvaluation trend (a by-product of this monetary policy regime) is driven by higher interest rate differentials to the USA and is harmful to their economic growth. In developed countries, this trend is not explained by their IT framework but by their high per capita income level, which reflects their high average labour productivity and development pattern. Yet, the trend of RER undervaluation in Asian and European developing countries and South Africa reflects their governments’ ability to combine a more flexible IT regime with a floating but managed exchange rate system aimed at preserving a competitive and stable RER in the long term.

We argue that the macroeconomic regime focused on the preservation of a stable and competitive real exchange rate (SCRER) has been a key factor explaining the rapid growth experienced in Argentina during 2002–2007. This policy promoted economic growth not only by preserving external and fiscal accounts sustainability, but also by providing incentives to the tradable sector and thus encouraging the expansion of its production, employment and investment. Monetary and exchange rate policies aimed at preserving a SCRER collide with conventional wisdom, particularly with the open economy trilemma. We argue that the critiques based on the trilemma may fail to hold in situations of excess supply of foreign currency and analyze the conditions under which the SCRER policy is sustainable.

This chapter develops a Kaldorian growth model of cumulative and circular causation to study the association between real exchange rate and long-run growth. The innovation is to consider the real exchange rate as an explanatory variable of labour productivity growth, in addition to the Kaldor-Verdoorn mechanism. The argument is that a competitive real exchange rate can induce capital accumulation and technological progress, which impacts labour productivity. The chapter's findings suggest that a competitive real exchange rate is associated with a greater (lower) long-run growth, in economies under a profit- (wage-)led regime of demand and capital accumulation. Such effect occurs via the cumulative and circular causation induced by the faster (slower) pace of demand growth, reinforced by the greater (lower) capital accumulation, and technological progress, induced by a competitive real exchange rate. Lastly, this study provides some empirical evidence that a competitive real exchange rate spurs the labour productivity growth rate of OECD countries.

[Author Affiliation]Jyh-Lin Wu, Institute of Economics, National Sun Yat-sen University, Kaohsiung, 804, Taiwan; jlwu2@mail.nsysu.edu.tw and the Department of Economics, National Chung-Cheng University, Chia-Yi, 106, Taiwan; ecdjlw@ccu.edu.tw; corresponding authorPei-Fen Chen, Department of International Business and Trade, Shu-Te University, Kaohsiung, Taiwan; cpf@mail.stu.edu.tw[Acknowledgment]We thank two anonymous referees for interesting and constructive comments on an earlier version of the paper. Any remaining errors are ours.1. Introduction Are price indices crucial for the existence of a nonlinear mean reversion of real exchange rates? Do prices or exchange-rate adjustments dominate when deviations from purchasing power parity (PPP) occur? Is the half-life implied by a nonlinear model reasonable? The purpose of this article is to address the above three questions for the UK and New Zealand over the period of recent float.The PPP hypothesis has been one of the most intensive research issues in empirical international finance over the past two decades. The rationale behind it is a simple arbitrage hypothesis, which results in a linear adjustment of deviations from PPP and the stationarity of real exchange rates. Empirically, existing evidence based on unit-root tests provide mixed results for PPP (Abuaf and Jorion 1990; Mark 1990; O'Connell 1998a).Theoretically there are several reasons for the nonlinear adjustment of deviations from PPP, such as the existence of market frictions or transaction costs (Sercu, Uppal, and Van Hulle 1995). In addition, models of pricing to market and exchange rate pass-through give rise to impediments to goods' arbitrage (Krugman 1987; Froot and Klemperer 1989). The implication is that the speed of adjustment of deviations from PPP depends on the magnitude of the deviations.On the other hand, the adoption of a price index is crucial in examining PPP. Several authors have argued that the consumer and producer price indices (CPI and PPI, respectively) do not correspond to their theoretical counterparts and contain measurement errors and aggregation biases (Cheung and Lai 1993; Imbs et al. 2005). In addition, the commodity basket for CPI and PPI includes nontradable goods, which impart a nonstationary component to real CPI or PPI exchange rates (Engel 1999). Recently, Xu (2003) argues that the price index of traded goods (TPI) is the appropriate one for PPP since it reflects the behavior of arbitrage better than the CPI or PPI.The purpose of this article, therefore, is to examine the nonlinear dynamics of TPI-based real exchange rates. Several authors have applied a smooth transition autoregressive (STAR) model to capture the nonlinear dynamics of real exchange rates, as it allows for a smooth adjustment between regimes (Michael, Nobay, and Peel 1997; Taylor, Peel, and Sarno 2001). There are several reasons for us to apply a band-threshold autoregressive (TAR) instead of a STAR-type model in our empirical analysis. First, our empirical evidence fails to reject the unit-root hypothesis against the hypothesis of a nonlinear STAR stationary process based on the test provided by Kapetanios, Shin, and Snell (2003).1 Second, the plots of CPI-, PPI-, and TPI-based real exchange rates in Figure 1 show that the TPI-based real rate has the largest variation among these three real rates. Third, our empirical evidence rejects the null hypothesis of linearity against TAR-type nonlinearity and supports the hypothesis that real exchange rates are TAR-type stationary.Figure 1 Plots of Real Exchange Rates for the UK and New Zealand (Figure omitted. See article image.)Several empirical studies have applied a threshold-type process to examine the nonlinear mean-reversion of real exchange rates (Obstfeld and Taylor 1997; O'Connell 1998b; Taylor 2001; Sarno, Taylor, and Chowdhury 2004). …

By the end of 1993, the unified and freely convertible ruble on current account represented a major step in Russia's foreign exchange management. The monetarist model of this paper (which gives a robust estimate of the real exchange rate) suggests that the impact of the gap between available cash supply and cash demand (in the next month) on the real rubledollar exchange rate (for the period beginning July 1992 and ending in December 1994) was small. Perhaps this parametric value reflects the restrictions on foreign exchange transactions, and the intervention of the Central Bank of Russia (CBR) in the Moscow Interbank Currency Exchange (MICEX) which determines the exchange rate. In contrast to the unification and current account convertibility of the ruble, progress during 1992-94 in the foreign trading arrangements was halting. Export trading was hobbled by export quotas, licensing and passport surveillance. There were no quantitative restrictions on import activity which nevertheless was subjected to steadily rising import tariffs (evidently calculated to counter the impact of the appreciating real ruble). The estimates of the trade equations suggest that the real exchange rate had no impact, ceteris paribus, on export performance but it influenced import flows. The changing pattern of Russia's trade, in terms of (export-import) commodity composition and orientation, has to be judged in the context of the asymmetrical impact of the exchange rate on that pattern. 1 The literature on the various aspects of Russia's transition to an open market economy is substantial. In fact, no aspect of the process has been left outside the scope of scholarly inquiries or the watchful scrutiny of governmental and multinational agencies. In particular, the impact of the uncontrolled inflation on the exchange rate, the continuously changing trade and foreign exchange arrangements, the structure and orientation of Russia's trade with the post-Soviet states and the rest of the world—and more—has been analyzed thoroughly by Easterly and da Cunha (1994), Drebentsov (1994), Illarionov (1994), Konovalov (1994), Kuznetsov (1994), Lucke (1994), Panich (1994), Rogovski (1994), Sarafanov (1994), and Sutela (1994), and in Economic Bulletin for Europe (1994, hereafter Bulletin), and Economic Survey of Europe in 1994-1995 (1995, hereafter Survey). From this perspective, there is little to add to the existing material on Russia's trade and financial interaction with the outside world as it moves toward a stable market economy. The focus of this paper is different. It starts from the available information on and policy changes in the exchange rate, foreign trade and institutional arrangements (section I), describes Russia's foreign trade performance with regard to its pattern and orientation (in section II); and then develops a model (in section III) for estimating the ruble-dollar real exchange rate. Import demand, export supply, and net export equations in which the observed real exchange rate (with a lag) is used are also presented in section III. The estimates (in section IV) of the monetarist model of the exchange rate adjustment indicate that the real exchange rate was not very sensitive with respect to the gap between the available real cash balances (in a given month) and the demand for real cash in the next month during 1992-94: the estimated elasticity is 0.15. The trade equations (in section IV) suggest that 2 during the period, the exchange rate had no role in the emerging pattern of Russia's exports to the non-FSU (former Soviet Union) countries but that imports were influenced by the exchange rate. In particular, the export control and licensing arrangements with respect to Russia's major exports seemed to have influenced its export performance. On the other hand, imports increased with a steadily appreciating real exchange rate despite rising but low average tariffs on imports. While the results need to be improved, they represent the very first attempt to construct a (monetarist) model of exchange rate determination for Russia and to analyze the role of the exchange rate in Russia's foreign trade performance. I. The Exchange Rate, Foreign Trade, and Institutional Arrangements Three factors are relevant for analyzing Russia's interaction with the world economy beginning 1992. The first relates to the policy makers' efforts to dismantle the remnants of the multiple exchange rates (which were inherited from the Soviet days) and manage an exchange rate policy that can effectively promote export competitiveness and contribute to inflation control. The second is the emerging regime of import and export policies that govern Russia's foreign trade. The institutional arrangements under which the Soviet Foreign Trade Organizations (FTOs) were increasingly replaced by private exporters and importers constitute the final feature. The Exchange Rate Regime A variety of exchange rates prevailed in early 1992. Arrangements with Regard to Current Account Transactions Among the major rates were those at which exporters were required to sell foreign exchange earnings and importers could acquire critical items such as food and medicines for

A competitive official real exchange rate is important to external balance and sustainable medium-term growth in developing countries. This article presents a methodology for estimating the appropriate real rate and provides a basis for evaluating the extent to which the prevailing rate is misaligned. In particular, the medium-term equilibrium real exchange rate is evaluated by estimating the effects of structural factors on the trend observed for a country's real rate compared with the rates of its major trading partners, taking into account the effects of macroeconomic policy. Structural factors include terms of trade, external capital flows, and trade policy, plus other factors relevant to the circumstances of individual countries. The implied change in the medium-term equilibrium real rate is compared with that of a historical reference period. The application of this methodology to two developing countries, the Philippines and Tanzania, illustrates how it can complement and improve upon other analytic approaches, such as those using purchasing power parity and analysis of parallel rates. This approach is complemented by an analysis of the relation between a country's real exchange rate and those of its major competitors.

This paper attempts to provide a comprehensive overview of the recent literature on the economics of real exchange rates. Since the rapid growth of this literature has been due to the development and application of econometric and statistical techniques, rather than to any new theoretical developments, the main focus of this paper is empirical. One way of motivating the material discussed here is to refer to the observed close correlation between real and nominal exchange rates during the recent floating experience, as illustrated in Figure 1. Indeed, it has become something of a stylised fact that the correlation between real and nominal exchange rates is very close to unity. Given the evident variability of real exchange rates, the immediate implication of this is that PPP cannot hold continuously and, in particular, in the short-run. But does it hold at all, and especially in a long-run context? There is some evidence to suggest that it does not, so one important theme in any discussion of real exchange rates concerns trying to quantify the importance of relative prices in explaining nominal exchange rate movements. As we shall see, much of this debate focuses on the magnitude of mean reversion in real exchange rates and, in particular, explaining why it is so slow. A related issue concerns unravelling the sources of the close correlation between real and nominal rates. Do nominal exchange rates drive real rates, or does causality run in the opposite direction?

This paper decomposes longer-run movements in (major) dollar real exchange rates into components associated with changes in nominal exchange rates and price levels, and their comovements. Though the decompositions suggest some permanent movements, they imply that there are large transitory components in real exchange rates. These transitory components in real exchange rates are found to be closely associated with those in nominal exchange rates. A stochastic version of Dornbusch’s overshooting model—configured with representative parameter values for the United States and subjected to permanent nominal shocks—can rationalize these transitory comovements of nominal and real exchange rates as well as several other features of the decompositions.

Recent research has documented a positive relationship between real exchange rate (RER) levels and economic growth in developing countries. The literature has interpreted this correlation as causality running from RER levels to growth rates; i.e., more competitive RER levels tend to favor growth. Little effort has been made, however, on the analysis of the policy instruments required to implement a successful competitive RER strategy. An exchange rate policy targeting a permanent change in the RER may run into difficulties: it is well documented that nominal and real exchange rate movements are correlated almost one for one in the short run but such co-movement vanishes in the long run. Targeting instead a transitory RER undervaluation can have long-lasting effects on economic performance if RER competitiveness is stable and durable enough to provide incentives for modern tradable activities to expand. The ability to provide such an environment may be beyond the scope of exchange rate policy. This paper aims to shed light on the complementary policies that facilitate the success of an exchange rate policy that temporarily increases competitiveness. A formal model is developed to analyze these issues. The main conclusion is that a currency depreciation is more likely to accelerate growth if it is simultaneously implemented with domestic demand management policies that prevent non-tradable price inflation and wage management policies that coordinate wage increases with tradable productivity growth.

ABSTRACTBetween 2002 and 2008, Argentina experienced a phase of very high and sustained economic growth. During this period, macroeconomic policy aimed to preserve a stable and competitive real exchange rate (SCRER). There is controversy on whether the SCRER policy was a key factor fostering growth and, even more, on whether it helped promote the expansion of tradable activities and exports. We use a methodology to detect episodes of export surges among Argentina’s export industries and find that labor-intensive industries—especially low- and medium-technology manufactures—experienced the highest proportion of export surges within this period. We also find that between 1980 and 2015, the highest proportion of surges in total exports occurred during the 2003–8 period. The performance of export of services was also particularly dynamic during this period. This evidence suggests that the SCRER policy was instrumental for export surges in Argentina during 2002–8.

This paper calculates the equilibrium real effective exchange rate for the Egyptian economy during the period (1974-2012). The paper reviews the evolution of Egypt’s exchange rate policy and the most significant developments of its real effective exchange rate during the same period. Using a structural vector auto-regression model identified with long-run restrictions, it evaluates the relative importance of real supply, demand and nominal shocks to the disturbances of Egypt’s real effective exchange rate. The identified shocks and their impulse responses are consistent with the theoretical priors stemming from the Mundell-Fleming model. The main contribution to the fluctuations of the real effective exchange rate, roughly 80 percent, comes from both real demand and supply shocks. The model is used to check if the real exchange rate in Egypt is misaligned during the period under investigation. It shows that the actual real effective exchange rate has deviated from the equilibrium real effective rate with various degrees during the estimation period

1. Introduction Despite its intuitive appeal, there is inconclusive evidence supporting purchasing power parity (PPP) between countries with low inflation rates during the post-Bretton Woods period. For example, Enders (1988), Taylor (1988), and MacDonald (1993) use various forms of cointegration tests-called stage-three tests-and find that real exchange rates exhibit large fluctuations with slow rates of decay toward a long-run mean. Froot and Rogoff's (1995) literature review presents a consensus estimate that deviations from long-run PPP have a half-life of about three years. This is somewhat disappointing since stage-three tests seem to be well suited to the task-they require no assumptions concerning exogeneity and they imply a sensible dynamic relationship among price levels and the exchange rate. The vast literature on PPP is indicative of the importance of the issue and the ambiguity of the findings. It is well recognized that standard cointegration tests have low power to reject the null hypothesis of no cointegration. This observation is especially relevant for PPP since any mean reversion in real rates is very gradual and the length of the post-Bretton Woods period sample period is relatively short. Efforts to increase the power of unit-root and stage-three tests have had mixed success. For example, Lothian and Taylor (1996) and Mark (1990) have tried to circumvent the low power of stage-three tests by using long spans of time-series data. Unfortunately, the use of long time spans raises the possibility of structural changes occurring during the period being examined. Panel unit-root tests are generally more supportive of PPP than are bilateral tests of real exchange rate behavior. For example, Oh (1996), Wei and Parsley (1995), and Wu (1996) have used panel data in order to enhance the power of standard unit-root tests. Although these particular articles are supportive of PPP, panel studies must deal with the thorny issues of cross-sectional correlation and the choice of the nations to include in the panel. Papell (1997) finds that allowing for serial correlation substantially weakens the evidence in favor of long-run PPP. O'Connell (1998) applies generalized least squares to panel data to eliminate any contemporaneous correlation in the error structure and finds no evidence supporting PPP The second problem with the standard unit-root and cointegration tests is that they implicitly assume symmetric adjustment. However, official intervention in the foreign exchange market means that nominal exchange rate adjustment may be asymmetric. Under a managed float, for example, one of the monetary authorities might be more willing to tolerate currency appreciation than depreciation. Similarly, a currency band mitigates exchange rate movements until the level of the band is altered. Furthermore, the slow adjustment of real exchange rates is often explained by the stickiness of national price levels. For example, in the well-known Dornbusch (1976) overshooting model, prices and the exchange rate move in the same proportion as the money supply in the very long run. However, in the short run, prices are sticky and monetary shocks cause PPP deviations since the exchange rate moves proportionately more than prices. Rhee and Rich (1995) and Madsen and Yang (1998) provide empirical evidence corroborating the implications of the asymmetric price adjustment models. The key point to note is that, if prices are primarily sticky in the downward direction, there is no reason to presuppose that real exchange rate adjustment is symmetric. In spite of the evidence supportive of asymmetric exchange rate and price adjustments, there are only a few nonlinear tests of PPP Although they do not explicitly test for PPP, Michael, Nobay, and Peel (1997) and Taylor and Sarno (1998) estimate real exchange rates as smooth-- transition threshold adjustment processes. Enders and Falk (1998) formally apply various nonlinear unit-root tests to real exchange rates and find little evidence of PPP. …

This paper analyzes the effects of changes in relative commodity prices on the distribution of income among factors of production in the context of two models of a simple, two-good economy. In the first model capital is treated as a specific factor in each industry, with labor mobile between industries. The assumption of specificity determines the direction of factor income changes, with magnitudes depending on substitutability between factors and on intensities of factor use within the two industries. In the second model, capital is viewed as a quasi-fixed factor. For the short run, this model is identical to the model first considered. For the long run, this model is identical to the Stolper-Samuelson model in which the direction and magnitude of factor income changes depend solely on relative factor intensities. The difference between the short-run and long-run determinants of changes in factor incomes gives rise to a conflict between factor owners' short-run and long-run interests.