This papers explores the effects of real exchange rate depreciations on growth across sectors,
identifying export, cost, and import-penetration channels. It tests the existence and magnitude
of these channels in a panel difference-in-difference methodology. Sectors that export more
to begin with, grow relatively more in response to a depreciation. The same is true of sectors
where import penetration in final demand is higher. There is no evidence that depreciations
reduce growth by making imported inputs more expensive. A 10 percent real depreciation
would increase growth of nontraditional sectors in Latin America by 0.6-2 percentage points
mostly through the export channel.