The value of the exchange rate and the Dutch disease

Abstract

This paper revisits the original (2008) paper on the Dutch disease, which defined it by the existence of two exchange rate equilibriums (the current and the industrial exchange rate equilibriums). Its novelty is in claiming that, as we have a value and a market price for each good or service, we also have a value and a market price for foreign money. The value is the cost plus reasonable profit corresponding to the exchange rate that makes competitive the country's competent business enterprises; the nominal exchange rates floats around the value according to the demand and supply of foreign money. This basic distinction of the exchange rate in terms of value and in terms of price allows us to understand that the two equilibriums are defined in value terms, and opens room for a clear distinction of the policies that affect the value from the ones that affect the market price of the exchange rate.

Dutch Disease-cum-financialization Booms and External Balance Cycles in Developing Countries

“…Domestic monetary authorities should be actively involved in fostering the home-economy long-run development by recognizing the importance that the exchange rate plays to favor productive and export diversification. They should take a much more developmentalist stand and support domestic production development by targeting an international competitive real exchange rate through the management of the nominal one (Bresser-Pereira, 2010). In presence of both long-run phenomena (the Dutch disease and natural-resource-oriented FDI) and medium-run ones (a surge in portfolio investment), this goal should be pursued by promptly and aggressively piling up foreign reserves.…”

Chinese Resource Demand or Commodity Price Shocks: Macroeconomic Effects For an Emerging Market Economy

“…These numbers depict the challenges of the rapid growth in China faced by Brazil and several Latin American economies, particularly as the growth in global demand for imports from China means a loss of export markets for local producers (Jenkins and Barbosa, 2012;Hiratuka and Sarti, 2017). The debate abounds in Brazil about relative de-industrialization, which is mainly attributed to the maintenance of the overvalued Brazilian currency during the boom phase of the commodity price cycle (Oreiro et al, 2014;Bresser-Pereira, 2013;Sonaglio et al, 2016;Jenkins, 2015). Despite this debate, evidence of sectoral reallocation in the Brazilian economy from the commodity sector to the noncommodity sector is difficult to find.…”

A dimensão regional da desindustrialização brasileira: uma contribuição ao debate nacional

“…Como o Brasil tem apresentado uma tendência à sobrevalorização da taxa de câmbio que é mais compatível com o equilíbrio em conta corrente, do que compatível com competitividade industrial, a "doença holandesa" se manifesta por meio do processo de desindustrialização mesmo com a conta corrente equilibrada (BRESSER PEREIRA; GALA, 2010). Esta escola de pensamento argumenta que o processo desencadeador dessa condição reside na abundância de recursos naturais, que implica na produção de commodities a um custo muito baixo, o que leva ao surgimento de rendas ricardianas, com forte atração de recursos externos, e que agravou-se entre 2003 e 2007, fase esta marcada pelo aumento das exportações, devido à elevação dos preços das commodities e o aumento expressivo das importações, permitindo a manutenção da tendência de crescimento do saldo da balança comercial, apesar deste comportamento se dar alheio à evolução do câmbio MARCONI, 2008, BRESSER-PEREIRA, 2013.…”