New Developmentalism: beyond competitive exchange rate

Vol. 40 No. 2 (2020)

Apr-Jun / 2020
Published April 1, 2020

How to Cite

Oreiro, José Luis. 2020. “New Developmentalism: Beyond Competitive Exchange Rate”. Brazilian Journal of Political Economy 40 (2):238-42.

New Developmentalism: beyond competitive exchange rate

José Luis Oreiro
Associate Professor at Department of Economics, Universidade de Brasília, Brasília/DF, Brasil.
Brazilian Journal of Political Economy, Vol. 40 No. 2 (2020), Apr-Jun / 2020, Pages 238-242


The aim of this article is to show that the achievement of a competitive level for real exchange rate is a necessary, although not sufficient condition for the catching-up of middle-income countries to developed countries. It is also required a change in the long-term expectations of real exchange rate by entrepreneurs which requires the elimination of the underlying causes of the tendency of overvaluation of real exchange rate, that encompass the Dutch Disease and capital account liberalization. Due to the existence of technological gap, industrial equilibrium exchange rate in middle-income countries may be higher enough to compensate domestic firms for their technological backwardness relative to firms of developed countries. This means that there is a space for Industrial and Science and Technology Policies in the New-Developmentalist theoretical framework.

JEL Classification: O11; O25; O40.

Keywords: New Developmentalism industrial equilibrium Dutch Disease capital flows