A note on the political economy of exchange rates in Argentina: new and classical developmentalism re-evaluated

Vol. 42 No. 4 (2022)

Oct-Dez / 2022
Published December 21, 2022
PDF-English
PDF-English

How to Cite

Fiorito, Alejandro, and Matías Vernengo. 2022. “A Note on the Political Economy of Exchange Rates in Argentina: New and Classical Developmentalism Re-Evaluated”. Brazilian Journal of Political Economy 42 (4):835-52. https://doi.org/10.1590/0101-31572022-3437.

A note on the political economy of exchange rates in Argentina: new and classical developmentalism re-evaluated

Alejandro Fiorito
Professor Universidad Nacional de Moreno, Buenos Aires, Argentina.
Matías Vernengo
Professor Bucknell University, Lewisburg, Pensylvania, United States.
Brazilian Journal of Political Economy, Vol. 42 No. 4 (2022), Oct-Dez / 2022, Pages 835-852

Abstract

The paper develops a model in which the relation between the real exchange
rate and the real wage, in the context of conflictive income distribution, is made explicit. It is
noted that the central bank tries to regulate the distributive relation exchange rate and real
wages through the changes in the interest rate. The theoretical point is that, under certain
circumstances, a relatively depreciated or high level of the real exchange rate might reduce
real wages and have a negative impact on economic growth. The paper also provides some
evidence for the Argentine case, and suggests that the Classical Developmentalist elasticity
pessimism seems, in the case of Argentina, to be validated. Also, the use of the exchange
rate as an instrument to bolster redistribution away from the working class, and to promote
investment and growth is also not born in the data.

JEL Classification: O11; F31; O54.


Keywords: Economic development exchange rate Argentina