Dynamic of Brazilian Foreign Trade by Technological Intensity

  •  Pedro Augusto Machado Neto    
  •  Elano Ferreira Arruda    
  •  Antônio Clécio de Brito    


This paper aims to investigate the long-run relationship between the real exchange rate and the Brazilian trade balance disaggregated by technological intensity classification, i.e., High Tech, Medium-High Tech, Medium Low Tech, and Low Tech, using monthly data from the period of January 2000 to December 2022. To achieve this aim, time-varying cointegration methodology is used, as it is understood that a linear approach is not well suited for developing economies, that face much influence from external events and internal turmoils, which is just the case of Brazil. It was found that, from the 4 sectors, only the low-tech sector has the usually expected signals, that is, a benefit from exchange depreciation, but even for this industry, this positive effect has been diminishing since 2009, due to structural changes in the Brazilian agricultural sector, which accounts for much of the added value in the low-tech goods. The dynamic real exchange rate elasticities for the medium-high and medium-low tech industries oscilated much throughout the time frame of the study, revealing the great influence of external and internal shocks in the change of the trajectory of these elasticities. The high-tech sector presented opposite signals in the estimated elasticities, revealing that exchange rate appreciations benefit it, probably due to its dependency on imported inputs.

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