The consumption-real exchange rate anomaly: Nontraded goods and distribution services

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In the data, Real Exchange Rates (RERs) tend to move in opposite directions with respect to the relative consumption across countries. Chari et al. (2002) refer to the inability of models to replicate the previous stylized fact as the consumption-RER anomaly. In this article, it is shown that an International Real Business Cycle (IRBC) model, similar to the one proposed by Chari et al. but extended by considering nontraded goods and an incomplete asset market structure, can solve the anomaly. Nontradable goods amplify wealth effects arising from the incomplete assets market structure, generating a negative co-movement between the RER and relative consumption. Adding Distribution Services (DS) improves the performance of the model in some other dimensions. In particular, DS help to generate countercyclical net exports.

Translated title of the contributionLa anomalía del tipo de cambio consumo-real: Bienes no transables y servicios de distribución
Original languageEnglish
Pages (from-to)255-271
Number of pages17
JournalApplied Economics
Issue number2
StatePublished - Jan 2013
Externally publishedYes


  • Distribution services
  • Incomplete markets
  • Nontraded goods


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