Investment Prices and the Real Exchange Rate, Journal of the European Economic Association
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.
Ariel Burstein, Joao C. Neves, Sergio Rebelo
Burstein, Ariel, Joao C. Neves, and Sergio Rebelo. 2004. Investment Prices and the Real Exchange Rate. Journal of the European Economic Association. 2(2-3): 302-309.