Tradability of Output and the Current Account in Europe

Client/Funding Institution

Jubilee Fund of the Austrian Central Bank


One aspect in the debate about current account imbalances in Europe is the consequence of ‘de-industrialisation’ observable in several European. This project highlights the role of tradeability of output as a key determinant of the current account. The relationship between a country’s specialisation in the production of tradeables will be investigated empirically for the full set of European countries over the period 1995-2013. To this end a tradeability index is developed which can be understood as a country’s expected degree of openness given its economic structure. The tradeability hypothesis forwarded predicts that countries producing more tradeable output have a tendency to run current account surpluses. Wage moderation, a structural shock affecting both the tradable and the non-tradeable sector, is used as theoretical underpinning for the tradeability hypothesis. The tradeability hypothesis is tested using both panel regressions and cross-country regression techniques.


July 2015 - December 2016

wiiw team Leader

Roman Stöllinger

wiiw Staff

Alexandra Bykova, Manuela Engleitner, Mario Holzner, Michael Landesmann, Leon Podkaminer

Keywords: Current account, tradable goods, wage moderation, Europe

Countries covered: EU-28, European Union

Research Areas: International Trade, Competitiveness and FDI, Sectoral studies