Real exchange rate and Brazilian industry productivity in the long run: theory, model and evidence for the recent period
The objective of this work is to analyze the relationship between the real
exchange rate and the productivity of the industry in the short and long terms. In order
to test the new-developmental hypothesis that a higher level of the real exchange rate is
related to a greater dynamism in the productivity of the industry, a mathematical model
of this theoretical relationship is developed and an econometrically estimated Non-Linear
Autoregressive Distributed Lag Model (NARDL). The results found are unprecedented, since they demonstrate the existence of a positive relationship between a real devaluation of the
effective exchange rate and the growth in labor productivity of Brazilian industry in the
long run. In addition, the work was able to demonstrate an existing asymmetry of the effect
of (de) valuation on productivity, that is, the estimates showed that devaluation positively
affects the productivity of Brazilian industry when compared to the negative effects of an
appreciation on productivity.
JEL Classification: C22; F43.
Keywords: Real exchange rate productivity new developmentalism