Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203999 
Year of Publication: 
2017
Series/Report no.: 
wiiw Working Paper No. 134
Publisher: 
The Vienna Institute for International Economic Studies (wiiw), Vienna
Abstract: 
We put forward the hypothesis that increasing specialisation in the production of non-tradable output has a negative impact on the current account balance. This tradability hypothesis is directly derived from a two-sector inter-temporal current account model. To test it empirically we develop a value-added based tradability index which captures the tradability of a country's output. Applied to a large sample of European countries, our empirical model provides strong evidence for a positive relationship between the current account balance and the tradability index. The main policy implication is that the anxieties about 'de-industrialisation' in large parts of Europe seem justified with a view to growing external imbalances.
Subjects: 
current account
tradability index
tradable goods
structural change
value added exports
JEL: 
F41
F32
F10
F14
Document Type: 
Working Paper

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