German D. Feldman (National University of San Martin, Buenos Aires, Argentina): Exchange Rate Policy, Output Growth and the Pattern of Specialization in Latin American Economies

The present article critically examines the transmission channels from real-exchange-rate undervaluation to output growth adduced by the so-called New-Structuralist (NS) literature. To this end, we slightly modify the canonical, dual-economy model for small open peripheral economies developed by these authors (see, among others, Frenkel and Ros, 2006; Razmi et al., 2012; Rapetti, 2013, Martins Neto and Tadeu Lima, 2016), and make the underlying productive structure depend on income distribution, as a problem of technical choices. This allows us both to discuss: (a) the limits of the transmission channels adduced by NS authors in their own terms, i.e. under the assumption that the tradable sector is the most dynamic sector in the economy; and (b) the further limitations of these channels when the pattern of trade is more suitable to characterize Latin American countries, whose tradable sector mainly exports primary goods under conditions of differential rent. We conclude that the channels work under highly restrictive assumptions, and therefore, the kind of positive relationship between real exchange rate and growth cannot be generally ascertained.