The Unfulfilled Promises in Trade and Growth
The Unfulfilled Promises in Trade and Growth
This chapter presents the argument that real devaluations fail to deliver on their promises in terms of fostering the growth of exports and economic activity in general in the developing countries, and suggests that devaluations have contradictory effects on the growth of exports and the economy in developing countries. They reduce the costs of tradable producers by reducing the real wages; yet, at the same time, they increase those costs through their effects in the rate of interest, the maturity of the loans, and many other variables crucial for an efficient economic performance. The net impact of devaluations cannot be determined theoretically. It depends on which of these effects are stronger. The evidence shows that, in most cases, most of the time, the negative effects are stronger—to the extent that the sign of the relationship implied by the statement “devaluations increase the competitiveness of countries” is reversed.
Keywords: devaluations, exports, loans, developing countries, economy
Yale Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.
Please, subscribe or login to access full text content.
If you think you should have access to this title, please contact your librarian.
To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us.
