Real exchange rate and Brazilian industry productivity in the long run: theory, model and evidence for the recent period

Kayo Cícero Quirino de Souza () and Guilherme Jonas C. da Silva ()

Brazilian Journal of Political Economy, 2021, vol. 41, issue 4, 657-678

Abstract: The objective of this work is to analyze the relationship between the realexchange rate and the productivity of the industry in the short and long terms. In orderto test the new-developmental hypothesis that a higher level of the real exchange rate isrelated to a greater dynamism in the productivity of the industry, a mathematical modelof this theoretical relationship is developed and an econometrically estimated Non-LinearAutoregressive Distributed Lag Model (NARDL). The results found are unprecedented, since they demonstrate the existence of a positive relationship between a real devaluation of theeffective exchange rate and the growth in labor productivity of Brazilian industry in thelong run. In addition, the work was able to demonstrate an existing asymmetry of the effectof (de) valuation on productivity, that is, the estimates showed that devaluation positivelyaffects the productivity of Brazilian industry when compared to the negative effects of anappreciation on productivity. JEL Classification: C22; F43.

Keywords: Real exchange rate; productivity; new developmentalism (search for similar items in EconPapers)
Date: 2021
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