 Three key levels of the real exchange rate in Latin AmericaMPRA Paper from University Library of Munich, Germany Abstract: The article presents a simple three-sector macroeconomic model that incorporates key structural features common to many Latin American economies. The model allows for the formal identification of three benchmark levels of the real exchange rate (RER). The macroeconomic equilibrium RER is the level consistent with the simultaneous achievement of internal and external balance (i.e., full employment and a sustainable balance of payments). The social equilibrium RER corresponds to a state in which workers, at full employment, obtain a real wage consistent with their income aspirations. The developmental RER is defined as a benchmark level that ensures the labor-absorbing tradable sector earns a risk-adjusted rate of profit comparable to that in developed countries, thereby fostering investment. The three-RER-levels framework provides a unified analytical setting to organize and compare alternative theories developed in Latin America —including unbalanced productive structures, distributive conflict, structural inflation, macroeconomic populism, and stop-and-go cycles— and to clarify how different configurations of the benchmark RER levels underpin competing diagnoses and development strategies in the region. Keywords: real exchange rate; Latin America; equilibrium; conflict; development. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:127649 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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