Real exchange rate movements, dutch disease and functional and sectoral income distribution
Zarzosa Valdivia, Fernando
Faculty of Applied Economics
Trade, integration and economic development : the EU and Latin America
7th International Conference of the Arnoldshain Seminar on Trade and, Integration, AUG 28-SEP 01, 2006, Vienna Econom Univ, Vienna, Austria
, p. 81-109
University of Antwerp
In a theoretical GEM model, we show how exogenous productivity, factor endowments, terms of trade and debt shocks, impact on real exchange rates, factors prices and production and consumption levels of a small economy. In addition, we evaluate possible income distribution effects and macroeconomic misalignments of those exogenous shocks, like the Dutch disease. This set up is perfectly suited to the characteristics of the main Latin America economies, Argentina, Brazil, Chile and Mexico were exogenous shocks an exchange rate policies need to be carefully gauged in terms of their impact on real exchange rates, the structure of the economy and the development of the tradable sector.