Abstract
This is an essay to show the rigorous connection between the neoclassical theory of trade, i.e. the Heckscher-Ohlin model in the context of General Equilibrium conditions, and the real exchange rate as determined by local and foreign prices in a common currency, i.e. the Purchasing Power Parity doctrine. The approach is strictly microeconomic. The purpose of the essay is to analyze the mechanism through which the exchange rate devaluation works for correcting the foreign trade deficit; but considering that, in the real world, this mechanism is not isolated from the influence of other macroeconomic and monetary variables. Some of the most important critiques are presented.
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