The Sectoral Effects of Real Depreciations in Latin America
21 Pages Posted: 1 Feb 2018
Date Written: November 2017
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: Suggested Citation