environment and market failures that are prominent in the tradable sector as bad institutions “tax” tradables more than non-tradables … out that bad institutions “tax” tradables more than non-tradables. Our results, robust to different undervaluation indexes …, highlight instead the importance of total factor productivity surge induced by an undervaluation in increasing growth. …

that a non-constant real exchange rate equilibrium is induced by different productivity growth rates between countries … non-tradables to proxy for BS effects. The empirical results provide further support for the hypothesis that real exchange …