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Title: |
Devaluation, Output and Wages |
| Author: |
Faria, Joao
Ricardo; Carneiro, Francisco Galrao |
| Author
Affiliation: |
U TX, Dallas;
Catholic U Brasilia |
| Source: |
International Economic Journal, Winter 2003, v. 17, no. 4, pp. 15-27 |
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Publication Date: |
Winter 2003 |
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Abstract: |
This paper
analyses the relationship between the real exchange rate, real wages and
aggregate output. We present a model in which changes in aggregate
output and in the real exchange rate precede changes in real wages, and
where output is expected to positively affect real wages while changes
in the real exchange rate are expected to negatively affect real wages.
The empirical analysis is carried out for the case of Brazil, a country
which has recently undergone an exchange-rate-based stabilisation plan
and where the impact of exchange rate anchoring on the real sector seems
to be relevant. Using monthly data for the period 1985 to 2001, Granger
causality tests and Johansen's Maximum likelihood estimates confirmed
the assumptions of our model by showing that real wages are positively
affected by output and negatively impacted by the real exchange rate in
the long run. |
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