Growth in low-income developing economies with large sectors charac- terized by underemployment is unlikely to be wage-led in the traditional neo-Kaleckian sense of the term. Output and employment in the sectors of the economy producing non-tradable output could be demand-led, how- ever, and...

Recent research has documented a positive relationship between real exchange rate (RER) levels and economic growth. The literature has interpreted this correlation as causality running from RER levels to growth rates; i.e., higher, undervalued, more competitive RERs tend to favor growth. Little...

Recent research has found a positive relationship between real exchange rate (RER) undervaluation and economic growth. Different rationales for this association have been offered, but they all imply that the mechanisms involved should be stronger in developing countries. Rodrik (2008) explicitly...

This paper analyzes the structural change implications of consumer credit expansions in a dual-sector open economy growth model. Policy-induced increases in banks' willingness and ability to lend result in new consumer lending, boosting consumption demand and average wages in the nontradable...

A recent body of empirical research has documented a strong association between the level and volatility of the RER and economic growth. This research has relied on a variety of econometric techniques applied to large cross-country data sets. Although the documented positive effects of both RER...

This paper surveys the theoretical and empirical literature on the effects of the real exchange rate (RER) on international trade, economic development and growth. We summarize the main conceptual issues, discuss the relevance of the RER as an instrument of development policy, provide an...

Pervasive credit constraints have been seen as major sources of slow growth in developing economies. This paper clarifies a mechanism through which an inefficient financial system can reduce productivity growth. Using a two-sector model, second, we examine the implications for employment and the...

This paper reconsiders two questions relating to India's economic growth: structural breaks in growth and the impact of equipment investment on aggregate economic growth. First, statistical tests of structural change show that economic growth in post-independence India has witnessed four...

Evidence regarding the relationship between distribution, demand, and growth in the short run has been mixed. Open economy models that create the possibility of "beggar-thy-neighbor" growth offer one theoretical explanation for why this may be expected. Several authors have argued recently,...

Voluminous theoretical and empirical research shows that real exchange rate (RER) undervaluation could be conducive to economic development. Why do countries then often avoid the pursuit of policies that facilitate undervaluation or even intentionally pursue RER overvaluation? We address this...