Real exchange rate and distribution effects on growth and macro fluctuations in open economies∗

The paper investigates the emergence of various forms of growth and distribu-tional patterns as the outcome of institutional and socioeconomic interactions be-tween broadly defined actors in an open economy macromodel. The focus is on both the long-run configuration and short-run dynamics of employment, functional dis-tribution, growth rates, capacity utilization, foreign net asset accumulation, terms of trade, and wealth in a stock-flow consistent framework. We first allow for the generation of growth and distributive fluctuations by extending the Structuralist-Goodwin results to the open economy. We specify a labor extraction process that shape the distributional conflict, including a short-run price-competitiveness effect on trade and social relations, and integrate the capital and foreign asset accumula-tion process with the endogenous distributive dynamics in a stock-flow consistent framework. We then consider alternative specifications of the labor market and the financial market and observe their effects on the equilibrium and the transitional dynamics. The complex nonlinear dynamics of growth, capacity utilization, distri-bution and foreign net asset position provides an analytical basis for testing how alternative policy and institutional reforms that can affect both longer run pattern of growth and distribution as well as macroeconomic stability