Structural Real Exchange Rate and Unemployment Interdependencies in Argentina
DOI:
https://doi.org/10.55444/2451.7321.2014.v52.n1.14936Keywords:
structural real exchange rate, unemployment rate, factor productivity, capital endowments, terms of tradeAbstract
Based on a three-sector micro-founded model of a small open economy, this paper investigates the interdependences between the structural real exchange rate (defined as the relative prices tradable to non-tradable goods prices) and the unemployment rate with an application to Argentina. The empirical results suggest a significant, negative relationship between the structural real exchange rate and the rate of unemployment, suggesting that an appreciating real exchange rate may lead to Dutch disease effects – which effectively contract the size of the manufacturing sector – and damage long-term growth and employment opportunities.
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Copyright (c) 2014 Eric J. Pentecost, Fernando Zarzosa Valdivia
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