Large devaluations are generally associated with large declines in real exchange rates. We develop a model which embodies two complementary forces that account for the large declines in the real exchange rate that occur in the aftermath of large devaluations. The first force is sticky...

Changes in the price of nontradable goods relative to tradable goods account for roughly 50% of the cyclical movements in real exchange rates.

This Paper studies the behaviour of inflation after nine large post-1990 contractionary devaluations. A salient feature of the data is that inflation is low relative to the rate of devaluation. We argue that distribution costs and substitution away from imports to lower quality local goods can...

This Paper documents four basic facts about investment goods and investment prices. First, investment has a very significant non-tradable component in the form of construction services. Second, distributions services (wholesaling, retailing, and transportation) are much less important for...

This Paper studies the role played by distribution costs in shaping the behaviour of the real exchange rate during exchange-rate-based stabilizations. We document that distribution costs are very large for the average consumer good: the represent more than 40% of the retail price in the US and...