are not economically feasible to consume across borders, are usually retail and wholesale sectors, restaurants, hotels, local transport, warehousing, communications, public utilities, real estate, retail banking, and most personal and commercial services.
He defined the equilibrium real exchange rate as the relative price of tradables to nontradables
. This relative price results in simultaneous attainment of both internal and external equilibrium for a set of given sustainable steady state values and other relevant variables such as taxes, international prices, and technology.
The parameter [phi] [member of] (0, 1) governs the share of nontradables
in the consumption basket, and [chi] > 0 is the CES between tradables and nontradables
"Among the rich countries, only American billionaires are getting richer on average over time, potentially reflecting extreme rents in resources, finance and nontradables
," the authors wrote.
Instead, the large expansion in nontradables
and consequent appreciation of the real exchange rate that came with the large capital inflows from the rest of Europe took place in the wholesale and retail sectors and in community services (education, health care, and social work).
Wolf, "International Evidence on Tradables and Nontradables
Inflation" NBER Working Paper No.
In an environment of ever increasing IT-enabled global connectivity, many services have been transformed from nontradables
In this context, measures to increase potential growth are becoming more important-from rethinking the shape of labor market institutions, to increasing competition and productivity in a number of nontradables
sectors, to rethinking the size of the government, to examining the role of public investment.
On the other hand, the tradable/nontradable based definition takes the relative price of the tradables and nontradables
in a country as an indicator for the level of competitiveness in international trade.
Our point of departure is the Domar (1944) model, with the modification of introducing two sectors of production, a sector of tradables and one of nontradables
, along the lines of the SMI, as described in a study by Lindbeck (1979).
At one level, large current account imbalances may affect domestic macroeconomic variables and asset prices by funding higher levels of domestic spending, especially on nontradables
. In turn, this may influence credit demand, for example through the impact on house prices (Aizenman and Jinjarak, 2009; Adam et al., 2012).
Most of the differences are in nontradables
. For instance, the average house in Northern Virginia costs around $250,000 while the average house in rural North Dakota might cost $15,000.