Developmental macroeconomics: a post-keynesian assessment

ABSTRACT Authors from distinct schools have studied the relationship between the exchange rate, investment and growth. This relationship is key for the named Developmental Macroeconomics, whose leaders have just recently started to compound a systematic model evolving all the ideas they had worked out since long ago and after several papers published in Brazilian and foreign Journals. The aim of the paper is to critically assess the Developmental Macroeconomics (DM) model. DM argues that the exchange rate in the lower and medium developed economies (LME) tends to be chronically and cyclically overvalued begetting a barrier to investment and growth in the manufacturing industry, which is the best to provoke the productive enhancement of any economy, preventing the convergence of per capita income between LME and developed countries. We conclude that DM contributes to the literature in many points. Nonetheless, DM model is misleading in some points, showing some mistakes and contradictions. It yet needs fulfilling several branches to construct a full model to explain why some LME do not reach sustainable growth and do not converge their per capita incomes to that of developed economies.