Investment Prices and Exchange Rates: Some Basic Facts

14 Pages Posted: 7 Apr 2004

See all articles by Ariel T. Burstein

Ariel T. Burstein

University of California, Los Angeles (UCLA) - Department of Economics

Joao C. Neves

Catholic University of Portugal (UCP) - Faculty of Economic Science and Business Studies

Sergio T. Rebelo

Northwestern University - Kellogg School of Management; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Date Written: March 2004

Abstract

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.

Keywords: Construction, investment, nominal exchange rate, prices, real exchange rate

JEL Classification: F41

Suggested Citation

Burstein, Ariel T. and das Neves, João Luís César and Tavares Rebelo, Sergio, Investment Prices and Exchange Rates: Some Basic Facts (March 2004). CEPR Discussion Paper No. 4290. Available at SSRN: https://ssrn.com/abstract=528205

Ariel T. Burstein

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Bunche Hall 8365
Los Angeles, CA 90095-1477
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310-206-6732 (Phone)
310-825-9528 (Fax)

João Luís César Das Neves

Catholic University of Portugal (UCP) - Faculty of Economic Science and Business Studies ( email )

Lisboa, 1600
Portugal
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+351 21 721 0252 (Fax)

Sergio Tavares Rebelo (Contact Author)

Northwestern University - Kellogg School of Management ( email )

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Leverone Hall
Evanston, IL 60208
United States
847-467-2329 (Phone)
847-491-5719 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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