The industrial equilibrium exchange rate in Brazil: an estimation

Abstract

This paper presents a methodology for calculating the industrial equilibrium exchange rate, which is defined as the one enabling exporters of state-of-the-art manufactured goods to be competitive abroad. The first section highlights the causes and problems of overvalued exchange rates, particularly the Dutch disease issue, which is neutralized when the exchange rate strikes the industrial equilibrium level. This level is defined by the ratio between the unit labor cost in the country under consideration and in competing countries. Finally, the evolution of this exchange rate in the Brazilian economy is estimated.

The New Developmentalism and productive sophistication

“…ei =industrial equilibrium exchange rate ec = current equilibrium rate x = the export price of the commodity Consequently, the New Developmentalism established a methodology for calculating the industrial equilibrium exchange rate. According to Marconi (2012), the necessary condition for this to occur is that there is an equality of its marginal income (from industry) with that of its competitors. In manufacturing production, the main cost of production is labour, differing from the production of primary goods which are more natural-resource intensive and less labour-intensive.…”

A grande recessão brasileira: diagnóstico e uma agenda de política econômica

“…7 Para a metodologia de cálculo da taxa de câmbio de equilíbrio industrial ver Marconi (2012 resumo -Este artigo tem por objetivo discutir as causas da grande recessão da economia brasileira (2014)(2015)(2016), bem como apresentar uma agenda de política econômica com vistas à superação dessa crise e retomada do crescimento em bases sustentadas. Argumenta-se que a grande recessão foi causada pela queda acentuada dos gastos de investimento ao longo do ano 2014, cuja origem se encontra na redução das margens de lucro das empresas não financeiras decorrente da elevação do custo unitário do trabalho e da sobrevalorização da taxa de câmbio.…”

The value of the exchange rate and the Dutch disease

“…We know that change in labor unit costs in one country in relation to its commercial partners means change in the exchange rate, but this does not happen through the demand and supply of foreign money; this happens due changes in the unit labor costs. If we have good reasons to believe that in a given period the industrial equilibrium exchange rate and the current equilibrium exchange rate were reasonably paired, we will be able to evaluate the evolution of the industrial equilibrium through the evolution of the relative unit labor cost (Marconi, 2012). 3 Thus, the Balassa-Samuelson mode, which shows the relation between productivity and the exchange rate is also a model thought in terms of value.…”