Industrial policy and exchange rate skepticism

Luiz Carlos Bresser-Pereira () and Fernando Rugitsky ()

No 2016_08, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: The aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies. The first section focuses on the thought of the so-called pioneers of development economics, specifically their preference for protectionism and their belated recognition that an exchange-rate policy could act as a substitute to it. In the second one, we analyze the exchange rate skepticism that arises out of the theories that identify a foreign constraint to growth, in addition to the one revealed by the pioneers. The third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short-run contractionary effects of a devaluation, reinforcing the skepticism in question. In the fourth section, we discuss the revival of development thinking in the 1980s and its discussion about East Asian trajectories, a literature that placed great emphasis on industrial policy. Finally, in the fifth section we discuss the new historical facts and the new development macroeconomics’ models that are putting an end to exchange rate skepticism.

Keywords: exchange rate; industrial policy; protectionism; East Asian countries. (search for similar items in EconPapers)
JEL-codes: B20 O24 O25 (search for similar items in EconPapers)
Date: 2016-03-24
New Economics Papers: this item is included in nep-his and nep-hpe
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Industrial policy and exchange rate scepticism (2018)
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