Real exchange rate and innovation: Empirical evidences

Vol. 38 No. 2 (2018)

Apr-Jun / 2018
Published February 26, 2020

How to Cite

Cândido de Souto, Keynis, and Marco Flávio Cunha Resende. 2018. “Real Exchange Rate and Innovation: Empirical Evidences”. Brazilian Journal of Political Economy 38 (2):280-303.

Real exchange rate and innovation: Empirical evidences

Keynis Cândido de Souto
Universidade Federal Rural de Pernambuco, Brazil.
Marco Flávio Cunha Resende
Universidade Federal de Minas Gerais, Brazil.
Brazilian Journal of Political Economy, Vol. 38 No. 2 (2018), Apr-Jun / 2018, Pages 280-303


The recent debate on the determinants of the lung-run economic growth highlights the role of a competitive and stable real exchange rate to foster growth. In this debate, the works follow two approaches: theoretical and empirical. In the theoretical approach a considerable portion of the works points towards the innovation as a transmission mechanism of the real exchange rate effects on income. These works emphasize that the real exchange rate affects growth because of its impacts on the determinants of innovation, such as investment. Despite the theoretical debate, the focus of empirical works is on the analysis of the exchange rate effects on income while the relationship between exchange rate and innovation remains untapped. This article seeks to contribute to the literature by providing empirical evidence that supports the link between the real exchange rate and innovation.

JEL Classification: O1.

Keywords: Real exchange rate technological innovation economic growth