Capital accumulation, structural change and real exchange rate in a Keynesian-Structuralist growth model

The aim of this paper is to show at theoretical level that maintaining a competitive real exchange rate positively affects the economic growth of developing countries by means of a Keynesian-Structuralist model that combines elements of Kaleckian growth models with the balance of payments constraine...

Full description

Saved in:
Bibliographic Details
Published in:Panoeconomicus 2015-01, Vol.62 (2), p.237-256
Main Authors: Oreiro, José, Missio, Fabricio, Jayme, Frederico
Format: Article
Language:English
Subjects:
Authority
Balance of payments
Capital
Capital accumulation
Currency in circulation
Developing countries
Economic development
Economic growth
Economic policy
exchange rate
Exchange rates
Export-import trade
Foreign exchange rates
Growth models
Income
Keynesian theory
Keynesianism
LDCs
Structural adjustment
Structural change
Structuralism
Studies
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The aim of this paper is to show at theoretical level that maintaining a competitive real exchange rate positively affects the economic growth of developing countries by means of a Keynesian-Structuralist model that combines elements of Kaleckian growth models with the balance of payments constrained growth models pioneered developed by Thirlwall. In this setting, the level of real exchange rate is capable, due to its effect over capital accumulation, to induce a structural change in the economy, making endogenous income elasticities of exports and imports. For reasonable parameter values it is shown that in steady-state growth there is two long-run equilibrium values for real exchange rate, one that corresponds to an under-valued currency and another that corresponds to an over-valued currency. If monetary authorities run exchange rate policy in order to target a competitive level for real exchange rate, than under-valued equilibrium is stable and the economy will show a high growth rate in the long-run.
ISSN:1452-595X
2217-2386
DOI:10.2298/PAN1502237O