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

Ariel Tomas Burstein, Joao C. Neves and Sergio Rebelo ()
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Joao C. Neves: Portuguese Catholic university

No 473, RCER Working Papers from University of Rochester - Center for Economic Research (RCER)

Abstract: This paper studies the role played by the distribution sector in shaping the behavior of the real exchange rate during exchange-rate-based stabilizations. We use data for the U.S. and Argentina to document the importance of distribution margins in retail prices and disaggregated price data to study price dynamics in the aftermath of Argentina's 1991 Convertibility plan. Distribution services require local labor and land so they drive a natural wedge between retail prices in different countries. We study in detail the impact of introducing a distribution sector in an otherwise standard model of exchange-rate-based stabilizations. We show that this simple extension improves dramatically the ability of the model to rationalize observed real exchange rate dynamics.

Keywords: Real Exchange Rate; Distribution; Inflation; Stabilization; Fixed Exchange Rates (search for similar items in EconPapers)
JEL-codes: F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-ifn
Date: 2000-05
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Related works:
Working Paper: Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilization (2001)
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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Persistent link: http://EconPapers.repec.org/RePEc:roc:rocher:473

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