ON THE DUTCH DISEASE AND ITS NEUTRALIZATION: A CLASSSICAL PERSPECTIVE

ARIEL DVOSKIN; GERMAN FELDMAN

Review of Keynesian Economics

Edward Elgar Publishing

Año: 2022 vol. 10 p. 382 - 405

A particularly influential group among heterodox economists argues that a ?competitive? real exchange-rate by itself triggers economic growth. New-Developmentalism, a subgroup within this broader view, makes a valuable contribution to the discussion by assigning two different roles to the ?competitive? or ?equilibrium? exchange rate: first, it acts as a ?light switch? by allowing tradable sectors that employ ?state-of-the-art? technology to earn the normal profit rate of the economy by selling their goods in global markets. And second, ensured that domestic firms have ?access to foreign demand?, growth is accelerated through several mechanisms. In this paper we exclusively focus on the first role, which has received much less attention in the literature. To do so, we present a formal framework inspired in the classical approach to prices and distribution that (a) captures the idea of the exchange rate as a ?light-switch? and b) allows examining the scopes and limits of the concept of ?Dutch disease?, the main structural feature that, according to New Developmentalism, may cause the systematic overvaluation of the exchange rate.