Determinants of the primary and manufacturing shares in GDP and the Real Exchange Rate in Argentina

Valencia y Villareal

Congreso; Arnoldshain X: Seminario en Globalización, Desarrollo y Capital Humano: El rol del Networking y la información; 2014

Universidad Jaume I y Universidad de Valencia

This paper analyses the determinants of the structural real exchange rate, defined as the relative tradable to nontradable price, and the sectoral shares, and applies it by reference to Argentina.The evidence suggests that a) structural real exchange rate depreciations increase the size of the primary sector, but reduce the share of the manufacturing sector in GDP, b) productivity improvements in the primary sector appreciate the structural real exchange rate, increase the size of the primary sector but reduce the size of the manufacturing sector, c) productivity improvements in the manufacturing sector diminish the structural real exchange rate and the size of both tradable sectors, d) government spending depreciate the structural real exchange rate,increase the size of the primary sector, but diminish the size of the manufacturing and the tradable sector as a whole, e) terms of trade improvements depreciate the structural real exchange rate, reduce the size of both tradable sectors and therefore perform Ducth disease effects; and f) the structural real exchange depreciated by about 37% with an 21% overshooting due to the collapse of the Argentinean currency at the end of 2001.