Undervalued Economy

In the context of economic discussions and building industries, an undervalued currency plays a significant role, as explained by Dani Rodrik in the EconTalk. He suggests that an undervalued currency acts as a form of industrial policy that effectively subsidizes all tradable industries across the board, without the need for specific selections by the government, which can often become politicized. He further demonstrates the negative impacts of overvaluation caused by uncontrolled capital inflows, particularly in Latin America, which has struggled to maintain competitive export industries due to currency overvaluations. In contrast, Asian countries have managed their currencies to prevent such issues and fostered industrial growth, highlighting the stark differences between these regions 1.