Capital Accumulation and Dynamic Gains from Trade
We compute welfare gains from trade in a dynamic, multi-country Ricardian model where international trade affects capital accumulation. We calibrate the model for 93 countries and examine transition paths between steady-states after a permanent, uniform trade liberalization across countries. Our model allows for both the relative price of investment and the investment rate to depend on the world distribution of trade barriers. Accounting for transitional dynamics, welfare gains are about 60 percent of those measured by comparing only the steady-states, and three times larger than those with ...
Domestic Innovation and International Technology Diffusion as Sources of Comparative Advantage
Productivity differences across countries determine patterns of international trade?hence, comparative advantage. We use a multi-industry model of international trade to estimate a measure of industry productivity. We then quantify the effect that domestic innovation and technology diffusion have in explaining differences in productivity across countries and industries. Consistent with standard growth theories, we find the following: (i) Higher-income countries benefit more from domestic innovation than lower-income countries, whereas lower-income countries benefit more from technology ...
Monetary Policy in Small Open Economies: The Role of Exchange Rate Rules
Understanding the costs and benefits of alternative monetary policy rules is important for economic welfare. Within the context of a small open economy model and building on the work of Mihov and Santacreu (2013), the author analyzes the economic implications of two monetary policy rules. The first is a rule in which the central bank uses the nominal exchange rate as its policy instrument and adjusts the rate whenever there are changes in the economic environment. The second is a standard interest rate rule in which the central bank adjusts the short-term nominal interest rate to changes in ...
Reopening the U.S. Economy an Industry at a Time
A novel index of physical contact exposure helps to identify the industries that are the most contact-intensive and might reopen later, as well as lower-contact industries that could reopen sooner.
Measuring Labor Productivity: Technology and the Labor Supply
GDP per hour (rather than GDP per capita) better measures labor productivity.
Synchronization of Business Cycles and the Extensive Margin of Trade
The business cycle is more highly synchronized between countries that trade more differentiated intermediate products with each other.
Which Countries and Industries Contributed the Most to the Decline in Trade Barriers Around the World?
Diverse trends across countries and industries are behind the global decline in trade barriers.
Convergence in Productivity, R&D Intensity, and Technology Adoption
Innovation and technology transfer are significant sources of productivity growth.
The Greek Debt Crisis: What Are the Potential Scenarios Going Forward?
Sound macroeconomic policies are key to preventing solvency crises in a currency union.