Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilization

Ariel Tomas Burstein, Joao C Neves and Sergio Rebelo ()

No 2944, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper studies the role played by distribution costs in shaping the behaviour of the real exchange rate during exchange-rate-based stabilizations. We document that distribution costs are very large for the average consumer good: the represent more than 40% of the retail price in the US and 60% of the retail price in Argentina. Distribution services require local labour and so so they drive a natural wedge between retail prices in different countries. We show that introducing a distribution sector in an otherwise standard model of exchange-rate-based stabilizations dramatically improves its ability to rationalise observed real exchange rate dynamics.

Keywords: distribution; fixed exchange rates; inflation; Real exchange rate; stabilization (search for similar items in EconPapers)
JEL-codes: F41 (search for similar items in EconPapers)
Date: 2001-09
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Related works:
Working Paper: Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based-Stabilizations (2000)
Working Paper: Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilizations (2000)
Journal Article: Distribution costs and real exchange rate dynamics during exchange-rate-based stabilizations (2003)
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