PENTECOST, E.J. and ZARZOSA VALDIVIA, F., 2016. Structural real exchange rate and unemployment interdependencies in Argentina. Revista de Economia y Estadistica, 52 (1), pp. 57-86.
Based on a three-sector, micro-founded model of a small open economy, this paper investigates the interdependences between the structural real exchange rate (defined as the relative prices tradable to non-tradable goods prices) and the unemployment rate with an application to Argentina. The empirical results suggest a significant, negative relationship between the structural real exchange rate and the rate of unemployment, suggesting that an appreciating real exchange rate may lead to Dutch disease effects – which effectively contract the size of the manufacturing sector – and damage long-term growth and employment opportunities.
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