Aggregate Investment Expenditures on Tradable and Nontradable Goods

50 Pages Posted: 24 Mar 2008

See all articles by Rudolfs Bems

Rudolfs Bems

International Monetary Fund (IMF); European Central Bank (ECB)

Date Written: February 2008

Abstract

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.

Keywords: Investment, Consumption, Income

Suggested Citation

Bems, Rudolfs, Aggregate Investment Expenditures on Tradable and Nontradable Goods (February 2008). IMF Working Paper No. 08/45, Available at SSRN: https://ssrn.com/abstract=1112147

Rudolfs Bems (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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