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Investment Prices and Exchange Rates: Some Basic Facts

  • Ariel T. Burstein

    (University of California, Los Angeles,)

  • Jo�o C. Neves

    (Portuguese Catholic University,)

  • Sergio Rebelo

    (Northwestern University, NBER, and CEPR,)

This paper documents four basic facts about investment goods and investment prices. First, investment has a very significant nontradable component in the form of construction services. Second, distributions services (wholesaling, retailing, and transportation) are much less important for investment than for consumption. Third, the import content of investment is much larger than that of consumption. Finally, in the aftermath of three large devaluations, the rate of exchange rate pass-through is, perhaps not surprisingly, highest for imported equipment and lowest for construction services. (JEL: F41) Copyright (c) 2004 The European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 2 (2004)
Issue (Month): 2-3 (04/05)
Pages: 302-309

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Handle: RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:302-309
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  1. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2003. "Why is Inflation so Low after Large Devaluations?," IEHAS Discussion Papers 0308, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  2. Lawrence J. Christiano & Christopher Gust & Jorge Roldos, 2002. "Monetary policy in a financial crisis," Working Paper Series WP-02-05, Federal Reserve Bank of Chicago.
  3. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2002. "Why Are Rates of Inflation So Low After Large Devaluations?," NBER Working Papers 8748, National Bureau of Economic Research, Inc.
  4. Ricardo Caballero & Arvind Krishnamurthy, 2000. "International and Domestic Collateral Constraints in a Model of Emerging Market Crises," NBER Working Papers 7971, National Bureau of Economic Research, Inc.
  5. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2004. "Financial development and the instability of open economies," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1077-1106, September.
  6. Jonathan Eaton & Samuel Kortum, 2001. "Trade in Capital Goods," NBER Working Papers 8070, National Bureau of Economic Research, Inc.
  7. Burstein, Ariel T. & Neves, Joao C. & Rebelo, Sergio, 2003. "Distribution costs and real exchange rate dynamics during exchange-rate-based stabilizations," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1189-1214, September.
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