Are Real Exchange Rate Undervaluation and Trade Integration Complements? An Evaluation on Employment Reallocation

This project studies how real exchange rate undervaluation affects labor reallocation between tradable and non-tradable sectors as economies become more integrated into global trade.

Using a local projections approach, the paper evaluates how undervaluation and trade integration interact in shaping structural transformation. The goal is to better understand when exchange rate policy and openness reinforce each other in supporting sustainable growth.