Relative prices and international competitiveness

Ruben D. Almonacid () and Gabriel A. Scrimini ()

Brazilian Journal of Political Economy, 1997, vol. 17, issue 2, 165-171

Abstract: In the last few years, Brazil has seen its trade balance deteriorate significantly.Although some people defended these results as a necessary ingredient of the stabilizationand growth process now in course, the fact that a similar experience, lived by Mexico, endedup in a severe debt crisis in December 1994, represents a serious warning. Trying to differentiatethe two cases some people have argued that the Mexican difficulties originated in anincorrect political transition. On the other hand, this paper suggests that in both cases, thereis a variable indicative of economic incentives, namely “the relative price of home and tradablegoods”, that could explain the behaviour of the trade balance. Regressions estimatedfor the two countries document this conclusion. JEL Classification: F14; F60.

Keywords: Trade balance; PPP; liberalization; relative prices; trade deficit (search for similar items in EconPapers)
Date: 1997
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