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Aggregate Investment Expenditures on Tradable and Nontradable Goods
Author:
Mr. Rudolfs Bems
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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 045
Language:
English
Publication Date:
01 Feb 2008
DOI:
https://doi.org/10.5089/9781451869071.001
ISBN:
9781451869071
ISSN:
1018-5941
Pages:
48
Keywords:
WP; expenditure share; investment expenditure; capital stock; positive correlation
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund