Investment Prices and Exchange Rates: Some Basic Facts

Burstein, Ariel T.; Neves, Joao C.; Rebelo, Sergio T.

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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)

There are 2 versions of this paper

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: 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). Available at SSRN: https://ssrn.com/abstract=528205