This paper explores, initially, a classical model of the determination of terms of trade developed by Shaikh (1999), which allows to analyze different types of closures that combine changes in prices and quantities to reach external trade balance.We show that usually the Keynesian tradition optsfor a quantity adjustment, as in Thirlwall Model, but
in Ferrari, Freitas and Barbosa Filho (2013) a “Novo Desenvolvimentista” hetherodo model the adjustments is achieved by a once and for all exchange rate change, initial price adjustment, followed by an endogenous variation of income, both of exports and imports, elasticities.
After presenting this model we develop a brief critical review of a more general theoretical an literary presentation of the Novo Desenvolvimentista argument, based on the work of one of its leading authors, Bresser Pereira. Finally,we test empirically the theoretical suggestions of Ferrari, Freitas and Barbosa Filho (2013) using specific National Account tables (Tabela de Recursos e Usos) and also data from the Comtrade. The main task is to examine the impact of the real exchange rate on trade balance, as specifically to identify a sector with strong positive externalities that could have been benefited of a more devaluated exchange rate. The empirical results could not identify such a sector for the Brazilian economy in the period from 2000 to 2009.
The strong effects of exchange rate on trade performance were felt in labour intensive sectors precisely the ones with weak positive externalities.
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