TY  - JOUR
AU  - Burstein,Ariel T.
AU  - Neves,Joao C.
AU  - Rebelo,Sergio
TI  - Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based-Stabilizations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7862
PY  - 2000
Y2  - August 2000
UR  - http://www.nber.org/papers/w7862
L1  - http://www.nber.org/papers/w7862.pdf
N1  - Author contact info:
Ariel Burstein
Department of Economics
Bunche Hall 8365
Box 951477
UCLA
Los Angeles, CA 90095-1477
Tel: 310/206-6732
Fax: 310/825-9528
E-Mail: arielb@econ.ucla.edu

Sergio Rebelo
Northwestern University
Kellogg School of Management
Department of Finance
Leverone Hall
Evanston, IL  60208-2001
Tel: 847/467-2329
Fax: 847/491-5719
E-Mail: s-rebelo@northwestern.edu
AB  - 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.
ER  -