In general this literature highlights the fact that

In general, this literature highlights the fact that a competitive and stable level of the RER can spurs investment by means of structural changes which, in turn, affects the balance of payments constraint. Therefore, the exchange rate policy can affect growth, not only due to the short run competitiveness effect, but also because it can provide incentives to investments, as well as to technological development. Indeed, as Missio and Jayme Jr. (2012) and Ferrari et al. (2013) highlighted, the level of RER can affect long run economic growth by means of their endogenous effects on trade income elasticities, besides the changes on short run price elasticities of exports and imports. Similarly, Razmi (2015) has argued that most countries (especially developing/emerging) are better described as small open economies in which exports are constrained by domestic aggregate supply rather than by foreign demand. By this way, the level of the RER does affect BOP-constrained growth, but it affects the capital accumulation and thereby the export supply rather than through effects on export demand (which is infinitely elastic for a small open country). In this context, the objective of this work is to put effort in the theoretical investigations of the interrelationships between economic growth, NIS and the real exchange rate (RER). In order to do so, it will be formally included in the analysis three new features: (i) the definition of the real exchange rate level according to the difference between the actual real exchange rate in relation to its industrial equilibrium level [as proposed by Bresser-Pereira et al. (2015)]; (ii) the endogeneity of NIS, which starts to respond to the size of the technological gap, the growth rate of public and private investments in R&D (as a proportion of output) and the technological spillover AZD 2281 capacity and, finally, (iii) the endogeneity of productivity in the industrial sector. By introducing the RER is highlighted, in a theoretical way, the recent empirical findings that emphasize the role of competitive RER in relaxing the balance of payment constraint on growth (Rodrik, 2008; Razmi et al., 2009; Rapetti et al., 2012). Thus, it allows including in BPCG framework a more active role for the maintenance of a competitive and stable exchange rate. Recently, a great number of new developments have expanded this literature, including the perspective of integration with other approaches (especially with the evolutionary and the institutionalist). Llerena and Lorentz (2004a,b), for example, contribute toward an integrated technology Schumpeterian view with demand effect via Verdoorn Law. On the other hand, Romero et al. (2011) as well as Jayme Jr. and Resende (2009) argue that the degree of development of the National Innovation System (NIS) is a qualitative determinant of a country productive potential, which plays a central role in explaining the demand export income elasticities. Therefore, there are causal relationships between the NIS, the international trade-income elasticities and export competitiveness. In this context, it is included in the model the endogeneity of the international trade income elasticities to the NIS. An important effort to incorporate technological change into a Dixon–Thirlwall model of export-led growth is found in León-Ledesma (2002). The author made R&D expenditures endogenous in an expanded version of the model. Nevertheless, our analysis innovates by proposing to analyze the role of NIS within the BPCG framework by new associations between post-Keynesian and evolutionary approaches (which are specified in Section 4). It is noteworthy that the impact of NIS and the RER level does not operate exclusively through the international trade elasticities, rather than other channels that could affect growth. That is, it is expected these variables have influence on growth also in other heterodox approaches (e.g., models of cumulative causation, two sector “North-South” models and so on). But, the main effort here is to present more clearly (with a formal model) the causal relationships between NIS and the RER level, the international trade-income elasticities and non-price competitiveness in the BPCG approach. Thus, it is possible to analyze how economic policy decisions (as the investment policy in R&D or as the currency market intervention) affect the rate of growth in long run. In other words, the paper explores a new transmission mechanism which reinforces the important role that the level of the real exchange rate has on growth, in line with the current literature.