DP4290 Investment Prices and Exchange Rates: Some Basic Facts

Author(s): Ariel Tomas Burstein, Joao C Neves, Sérgio Rebelo
Publication Date: March 2004
Keyword(s): construction, investment, nominal exchange rate, prices, real exchange rate
JEL(s): F41
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4290

This Paper documents four basic facts about investment goods and investment prices. First, investment has a very significant non-tradable 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.