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Real exchange rate and economic complexity in a North-South structuralist BoPG model

Luciano Ferreira Gabriel () and Fabricio Missio ()
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Luciano Ferreira Gabriel: Universidade Federal de Vi?osa, Brazil

PSL Quarterly Review, 2018, vol. 71, issue 287, 439-465

Abstract: The main objective of this work is to analyze theoretically and empirically the interrelationships between the real exchange rate (RER) and the economic complexity level in a Keynesian-Structuralist framework for two regions, the (developed) North and the (developing) South. In the analysis presented here, the RER level matters for influencing the industrial (manufacturing) share of GDP as well as the GDP growth rate compatible with the balance-of-payments equilibrium. Higher levels of economic complexity influence the South growth rate, depending on the effects of innovation, knowledge stock, and human capital on international trade. The empirical evidence in panel data suggests that undervalued RER and a higher manufacturing share in the developing-countries sample exhibit positive and significant effects on the economic complexity level.

Keywords: manufacturing; technological frontier; real exchange rate (search for similar items in EconPapers)
JEL-codes: L16 O10 O33 (search for similar items in EconPapers)
Date: 2018
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