Real exchange rate and openness in emerging economies: Argentina in the long run

Abstract

Argentina's economic policies since the beginning of the century, provide an interesting background to the study of real exchange rate (RER) management in emerging countries. In this article, four types of RER overvaluation are identified. In the 1920s, Argentina provides a short example of overvaluation in the context of a fixed exchange rate policy. Moreover, estimations show that import substitution regimes can lead to a misalignment of RER. Argentina illustrates also the difficult management of RER in a volatile environment. Results allow, in addition, a better understanding of the failure of the trade liberalization attempts of the country and reminds one that successfully integrating the world economy requires an appropriate RER policy.

Mean reversion in long-horizon real exchange rates: Evidence from Latin America

“…21 Other modelling work focusing on developing economies includes a similar set of fundamentals. For instance Wood (1991), Montiel (1999) -on which Baffes et al (1999) draw, Richaud et al (2003) -and Rodriguez (1994. 22 A change in the intra-country relative productivity in non-tradable goods has an opposite effect, therefore undermining the effect emanating from the tradable sector.…”