The Sectoral Effects of Real Depreciations in Latin America

21 Pages Posted: 1 Feb 2018

See all articles by Sergi Lanau

Sergi Lanau

International Monetary Fund (IMF)

Date Written: November 2017

Abstract

This papers explores the effects of real exchange rate depreciations on growth across sectors, identifying export, cost, and import-penetration channels. It tests the existence and magnitude of these channels in a panel difference-in-difference methodology. Sectors that export more to begin with, grow relatively more in response to a depreciation. The same is true of sectors where import penetration in final demand is higher. There is no evidence that depreciations reduce growth by making imported inputs more expensive. A 10 percent real depreciation would increase growth of nontraditional sectors in Latin America by 0.6-2 percentage points mostly through the export channel.

Keywords: Real exchange rates, Exchange rate depreciation, Economic sectors, Exports, Imports, Economic growth, Latin America, real exchange rate; depreciation; exports; imports; growth, real exchange rate, depreciation, exports, imports, growth, Country and Industry Studies of Trade

JEL Classification: F14, O47

Suggested Citation

Lanau, Sergi, The Sectoral Effects of Real Depreciations in Latin America (November 2017). IMF Working Paper No. 17/249, Available at SSRN: https://ssrn.com/abstract=3116206

Sergi Lanau (Contact Author)

International Monetary Fund (IMF) ( email )

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Washington, DC 20431
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