The impact of exchange rate misalignments on manufacturing investment in Brazil

Nelson Marconi, Tiago Couto Porto () and Eliane Araujo

Brazilian Journal of Political Economy, 2022, vol. 42, issue 4, 853-875

Abstract: We analyze the hypothesis that variations on manufacturing investment areinfluenced by the difference between the real effective and industrial equilibrium exchangerates and by the difference between the current account and industrial equilibrium exchangerates (a proxy for the Dutch disease). The current account equilibrium exchange rateis defined as the rate that guarantees that the current account of a country is balancedintertemporally, and the industrial equilibrium exchange rate corresponds to the rate thatmakes competitive those companies producing internationally tradable non-commoditiesgoods and services in the so-called state-of-art. First, the concepts and methodologies forestimating the current account and industrial equilibrium exchange rate are explained. Then,to test our hypothesis, a database for 24 Brazilian manufacturing sectors was built from2007 to 2017. A dynamic panel data model was adopted to estimate the relationship betweenthese currency misalignments and the manufacturing investment. The results suggest that themagnitude of those differences influences investment decisions, potentially contributing toeconomic growth and development. JEL Classification: E22; F31; L60.

Keywords: Real exchange rates; manufacturing investment (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://centrodeeconomiapolitica.org.br/repojs/ind ... ticle/view/2367/2306 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ekm:repojs:v:42:y:2022:i:4:p:853-875:id:2367

Access Statistics for this article

More articles in Brazilian Journal of Political Economy from Center of Political Economy
Bibliographic data for series maintained by Brazilian Journal of Political Economy (Brazil) ().