International Evidence on Tradables and Nontradable Inflation

Using 1970-1985 sectoral data for the OECD we find that inflation in nontradable goods is higher than in tradables, We identify a demand shift towards nontradables and faster growth of total factor productivity in the tradable goods sector as the prime causes of higher nontradables inflation. In addition. disinflation attempts and the exchange rate regime appear to have had significant influence on the relative inflation rate.