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Competitive Exchange Rate and Public Infrastructure in a Macrodynamic of Economic Growth
Author(s) -
Neto Antonio Soares Martins,
Lima Gilberto Tadeu
Publication year - 2017
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12143
Subject(s) - exchange rate , productivity , economics , public infrastructure , currency , dual (grammatical number) , production (economics) , dual economy , public policy , public sector , economic policy , monetary economics , international economics , macroeconomics , market economy , economy , economic growth , art , literature , political science , law
We develop a dual open‐economy model which incorporates a flow of public infrastructure as a factor of production to investigate effects of a competitive exchange rate policy under different levels of provision of public infrastructure. It is suggested that an exchange rate policy coordinated with a public infrastructure policy should produce better results. By increasing productivity in the tradable sector and reducing inflationary pressures, this supply‐side public policy contributes to the success of an economic growth strategy led by a competitive currency.