Many economic booms have been accompanied by real
exchange rate appreciations, large trade defcits -which
have sometimes persisted after the return to the initial
exchange rate parity- and a deteriorating traded sector.
Those circumstances have typically raised the question
of the de-sirability of some stabilization policy.
We show that the dynamics induced by an expected
productivity shock in an economy where the capital stock
is non-mobile across sectors, match those circumstances.
Furthermore, ...
Many economic booms have been accompanied by real
exchange rate appreciations, large trade defcits -which
have sometimes persisted after the return to the initial
exchange rate parity- and a deteriorating traded sector.
Those circumstances have typically raised the question
of the de-sirability of some stabilization policy.
We show that the dynamics induced by an expected
productivity shock in an economy where the capital stock
is non-mobile across sectors, match those circumstances.
Furthermore, we obtain that credit market imperfections
tend to exacerbate trade deficits, and to cause an
inefficient capacity reduction in the traded sector.
Some stabilization policies are explored.
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