IDEAS home Printed from https://ideas.repec.org/p/wii/wpaper/134.html
   My bibliography  Save this paper

Tradability of Output and the Current Account: An Empirical Investigation for Europe

Author

Listed:

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.

Suggested Citation

  • Roman Stöllinger, 2017. "Tradability of Output and the Current Account: An Empirical Investigation for Europe," wiiw Working Papers 134, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:134
    as

    Download full text from publisher

    File URL: https://wiiw.ac.at/tradability-of-output-and-the-current-account-an-empirical-investigation-for-europe-dlp-4122.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Charles Engel, 1999. "Accounting for U.S. Real Exchange Rate Changes," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 507-538, June.
    2. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
    3. Jonathan D. Ostry & Carmen M. Reinhart, 1992. "Private Saving and Terms of Trade Shocks: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 495-517, September.
    4. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2010. "The Impact of Structural Policies on Saving, Investment and Current Accounts," OECD Economics Department Working Papers 815, OECD Publishing.
    5. Agnieszka Gehringer, 2015. "New evidence on the determinants of current accounts in the EU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(4), pages 769-793, November.
    6. Clément Nedoncelle, 2016. "Trade Costs and Current Accounts," The World Economy, Wiley Blackwell, vol. 39(10), pages 1653-1672, October.
    7. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    8. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    9. G. Gaulier. & V. Vicard., 2012. "Current account imbalances in the euro area: competitiveness or demand shock?," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 27, pages 5-26, Autumn.
    10. Maddala, G S & Wu, Shaowen, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
    11. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412, National Bureau of Economic Research, Inc.
    12. Philip R. Lane & Barbara Pels, 2012. "Current Account Imbalances in Europe," The Institute for International Integration Studies Discussion Paper Series iiisdp397, IIIS.
    13. Jean-Marc Fournier & Isabell Koske, 2010. "A Simple Model of the Relationship Between Productivity, Saving and the Current Account," OECD Economics Department Working Papers 816, OECD Publishing.
    14. Jonathan D. Ostry & Carmen M. Reinhart, 1992. "Private Saving and Terms of Trade Shocks: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 495-517, September.
    15. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    16. Ehmer, Philipp, 2014. "The impact of diverging economic structure on current account imbalances in the euro area," Wittener Diskussionspapiere zu alten und neuen Fragen der Wirtschaftswissenschaft 27/2014, Witten/Herdecke University, Faculty of Management and Economics.
    17. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roman Stöllinger, 2020. "Tradability of output and the current account in Europe," International Economics and Economic Policy, Springer, vol. 17(1), pages 167-218, February.
    2. Roman Stöllinger & Mario Holzner, 2017. "State Aid and Export Competitiveness in the EU," Journal of Industry, Competition and Trade, Springer, vol. 17(2), pages 203-236, June.
    3. Bertinelli, Luisito & Cardi, Olivier & Restout, Romain, 2022. "Labor market effects of technology shocks biased toward the traded sector," Journal of International Economics, Elsevier, vol. 138(C).
    4. Luisito Bertinelli & Olivier Cardi & Romain Restout, 2015. "Technical Change Biased Toward the Traded Sector and Labor Market Frictions," Working Papers halshs-01252508, HAL.
    5. Luca Antonio Ricci & Gian Maria Milesi-Ferretti & Jaewoo Lee, 2013. "Real Exchange Rates and Fundamentals: A Cross-Country Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(5), pages 845-865, August.
    6. BERTINELLI, Luisito & CARDI, Olivier & RESTOUT, Romain, 2020. "Relative Productivity And Search Unemployment In An Open Economy," Journal of Economic Dynamics and Control, Elsevier, vol. 117(C).
    7. Cardi, Olivier & Restout, Romain, 2015. "Imperfect mobility of labor across sectors: a reappraisal of the Balassa–Samuelson effect," Journal of International Economics, Elsevier, vol. 97(2), pages 249-265.
    8. Giuseppe Caivano & Nicola D. Coniglio, 2016. "Long-Run Drivers of Current Account Imbalances in the EU: the Role of Trade Openness," SERIES 03-2016, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised May 2016.
    9. repec:zbw:rwirep:0557 is not listed on IDEAS
    10. Ronald MacDonald & Flávio Vieira, "undated". "A panel data investigation of real exchange rate misalignment and growth," Working Papers 2010_13, Business School - Economics, University of Glasgow.
    11. Rustam Jamilov, 2013. "J-Curve Dynamics and the Marshall–Lerner Condition: Evidence from Azerbaijan," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(3), pages 313-323, February.
    12. Ferdinand Owoundi & Jacques Landry Bikai, 2021. "On the neutrality of the exchange rate regime regarding real misalignments: Evidence from sub‐Saharan Africa," Bulletin of Economic Research, Wiley Blackwell, vol. 73(3), pages 327-345, July.
    13. Campo, Jacobo & Mendoza, Henry, 2018. "Gasto público y crecimiento económico: un análisis regional para Colombia, 1984-2012," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 88, pages 77-108, January.
    14. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2011. "Current Account Imbalances: can Structural Reforms Help to Reduce Them?," OECD Journal: Economic Studies, OECD Publishing, vol. 2011(1), pages 1-44.
    15. Dumrongrittikul, Taya & Anderson, Heather M., 2016. "How do shocks to domestic factors affect real exchange rates of Asian developing countries?," Journal of Development Economics, Elsevier, vol. 119(C), pages 67-85.
    16. Hãœbler, Michael & Keller, Andreas, 2010. "Energy savings via FDI? Empirical evidence from developing countries," Environment and Development Economics, Cambridge University Press, vol. 15(1), pages 59-80, February.
    17. Fr餩ric Laurin, 2012. "Trade and regional growth in Spain: panel cointegration in a small sample," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 435-447, February.
    18. Maurice Obstfeld & Kenneth S. Rogoff, 2000. "Perspectives on OECD economic integration : implications for U.S. current account adjustment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 169-208.
    19. Lee, Chien-Chiang & Chang, Chun-Ping, 2008. "Energy consumption and economic growth in Asian economies: A more comprehensive analysis using panel data," Resource and Energy Economics, Elsevier, vol. 30(1), pages 50-65, January.
    20. Carlos Alberto Barreto Nieto & Jacobo Campo Robledo, 2012. "Relación a largo plazo entre consumo de energía y PIB en América Latina: Una evaluación empírica con datos panel," Revista Ecos de Economía, Universidad EAFIT, October.
    21. Fousekis, Panos, 2007. "Convergence of Relative State-level Per Capita Incomes in the United States Revisited," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 37(2), pages 1-10.

    More about this item

    Keywords

    current account; tradability index; tradable goods; structural change; value added exports;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wii:wpaper:134. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Customer service (email available below). General contact details of provider: https://edirc.repec.org/data/wiiwwat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.