Exchange Rate Regime and Sectorial Profi tability in a Small Open Economy: A Theoretical and Empirical Analysis of Argentina (2016-2022)
Ariel Dvoskin,
German Feldman and
Gabriel Montes-Rojas
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Ariel Dvoskin: BCRA/CONICET
No 315, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)
Abstract:
This paper studies, both theoretically and empirically, tradable (T) and non-tradable (N) profit rates dynamics in a small, price-taker peripheral economy under foreign exchange controls and parallel exchange rates (ER). Using a state-space econometric representation of the Argentine economy for the period April 2016- April 2023, we found evidence to support three main hypotheses derived from the theoretical models. First, an official exchange rate depreciation increases tradable goods profit rates, but has no effect on non-tradeable goods profitability. Second, the rise of the financial exchange rate increases sector N’s profit rate but has no effect on T’s. Moreover, this effect depends on the magnitude of the ER gap in a positive, but non-linear way. Third and finally, over sufficient time, both profit rates tend to influence each other, through the action of competition. This means that, eventually, and increase (depreciation) in the official exchange rate exerts its influence on sector N’s profit rate; while, if sufficiently persistent and big enough, a rise in the financial ER ends up affecting sector T’s profit rate too.
Keywords: Argentina; Inflation; Exchange rate; Foreign exchange controls; Sectorial profit rates; Small open economy (search for similar items in EconPapers)
JEL-codes: E11 E31 F41 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2024-04
New Economics Papers: this item is included in nep-hme, nep-mon and nep-opm
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https://rednie.eco.unc.edu.ar/files/DT/315.pdf (application/pdf)
Related works:
Working Paper: EXCHANGE-RATE REGIME AND SECTORIAL PROFITABILITY IN A SMALL OPEN ECONOMY: A THEORETICAL AND EMPIRICAL ANALYSIS OF ARGENTINA (2016-2023) (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:315
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