tradables

There may be some real economy border effects between countries which limit the flow of tradables or people.

Where the subscript "t" denotes the tradables sector.

However, productivity differs less from country to country for non-traded goods than for tradables.

"Real appreciation is also observed in tradables and often accounts for the bulk in the overall appreciation".

Though there is static loss, a higher relative price of tradables could lead to a dynamic gain through higher rate of capital accumulation.

They argue that in practise, border barriers mean that tradables appreciate with productivity, and say:

Note that the lack of a country specific subscript on the price of tradables means that tradable goods prices are equalized between the two countries.

Since there has been less technological growth in the economy relative to other countries, its comparative advantage in non-booming tradable goods will have shrunk, thus leading firms not to invest in the tradables sector.

Quoting the abstract: "an increase in the productivity and competitiveness of the distribution sector with respect to foreign countries leads to an appreciation of the real exchange rate, similarly to what a relative increase in the domestic productivity of tradables does".

The relative price differential between tradables and non-tradables from high-income to low-income countries is a consequence of the Balassa-Samuelson effect and gives a big cost advantage to labour intensive production of tradable goods in low income countries (like Ethiopia), as against high income countries (like Switzerland).