Working Paper: CEPR ID: DP4290
Authors: Ariel Thomas Burstein; Joao C. Neves; Sergio Rebelo
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 Codes: F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nontradable component of investment (E20) | overall investment expenditure (E20) |
| exchange rates (F31) | prices of imported equipment (F14) |
| exchange rates (F31) | prices of domestic equipment (P22) |
| exchange rates (F31) | construction prices (L74) |
| tradable goods (F19) | price responsiveness to exchange rates (F31) |
| nontradable goods (H49) | price responsiveness to exchange rates (F31) |