Aggregate Investment Expenditures on Tradable and Nontradable Goods

Author/Editor:

Rudolfs Bems

Publication Date:

February 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper shows that aggregate investment expenditure shares on tradable and nontradable goods are very similar across countries and regions. Furthermore, the two expenditure shares have remained close to constant over time, with the average expenditure share on nontradables varying between 0.54-0.62 over the 1960-2004 period. These empirical findings offer a new restriction for two-sector models of the aggregate economy. Combined with the fact that the relative price of nontradables correlates positively with income and exhibits large differences across space and time, our findings suggest that tradable and nontradable goods in investment can be modeled using the Cobb-Douglas aggregator.

Series:

Working Paper No. 08/45

Subject:

English

Publication Date:

February 1, 2008

ISBN/ISSN:

9781451869071/1018-5941

Stock No:

WPIEA2008045

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

48

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