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Working Paper
Innovation and Trade Policy in a Globalized World
Akcigit, Ufuk; Impullitti, Giammario; Ates, Sina T. (2018-06-15)
How do import tariffs and R&D subsidies help domestic firms compete globally? How do these policies affect aggregate growth and economic welfare? To answer these questions, we build a dynamic general equilibrium growth model where firm innovation endogenously determines the dynamics of technology, market leadership, and trade flows, in a world with two large open economies at different stages of development. Firms? R&D decisions are driven by (i) the defensive innovation motive, (ii) the expansionary innovation motive, and (iii) technology spillovers. The theoretical investigation illustrates ...
International Finance Discussion Papers , Paper 1230

Working Paper
The Evolution of Comparative Advantage: Measurement and Implications
Levchenko, Andrei A.; Zhang, Jing (2014-10-07)
We estimate productivities at the sector level for 72 countries and 5 decades, and examine how they evolve over time in both developed and developing countries. In both country groups, comparative advantage has become weaker: productivity grew systematically faster in sectors that were initially at greater comparative disadvantage. These changes have had a significant impact on trade volumes and patterns, and a non-negligible welfare impact. In the counterfactual scenario in which each country's comparative advantage remained the same as in the 1960s, and technology in all sectors grew at the ...
Working Paper Series , Paper WP-2014-12

Working Paper
Optimal Monetary Policy in an Open Emerging Market Economy
Iyer, Tara (2016-06-20)
The majority of households across emerging market economies are excluded from the financial markets and cannot smooth consumption. I analyze the implications of this for optimal monetary policy and the corresponding choice of domestic versus external nominal anchor in a small open economy framework with nominal rigidities, aggregate uncertainty and financial exclusion. I find that, if set optimally, monetary policy smooths the consumption of financially excluded agents by stabilizing their income. Even though Consumer Price Index (CPI) inflation targeting approximates optimal monetary policy ...
Working Paper Series , Paper WP-2016-6

Journal Article
An investigation of co-movements among the growth rates of the G-7 countries
Doyle, Brian M.; Faust, Jon (2002-10)
Early in 2000, after a decade of economic expansion, growth began to slow simultaneously in the large, advanced economies known as the Group of Seven (G-7)--Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The general slide in GDP growth fueled speculation that a period was emerging in which broad movements in the economies of the industrialized countries would be more closely linked. Proponents of this view argued that greater trade in goods and financial markets was leading to a greater synchronization of national economies. A rise in the co-movement of GDP ...
Federal Reserve Bulletin , Volume 88 , Issue Oct , Pages 427-437

Working Paper
The quantitative role of capital-goods imports in U.S. growth
Cavallo, Michele; Landry, Anthony (2010)
Over the last 40 years, an increasing share of U.S. aggregate E&S investment expenditure has been allocated to capital-goods imports. While capital-goods imports were only 3.5 percent of E&S investment in 1967, by 2008 their share had risen tenfold to 36 percent. The goal of this paper is to measure the contribution of capital-goods imports to growth in U.S. output per hour using a simple growth accounting exercise. We find that capital-goods imports have contributed 20 to 30 percent to growth in U.S. output per hour between 1967 and 2008. More importantly, we find that capital-goods imports ...
Globalization Institute Working Papers , Paper 47

Working Paper
Structural Change in Sub-Saharan Africa: An Open Economy Perspective
de Vries, Gaaitzen; Yi, Kei-Mu; Mensah, Emmanuel; Kruse, Hagen; Vidogbena, Yabo (2024-12-24)
We study the evolution of manufacturing value added shares in 11 sub-Saharan African (SSA) countries through the lens of an open economy model of structural change. Our analysis leverages recent developments in input-output tables in SSA countries. Our model allows for income effects via non-homothetic preferences, substitution and relative price effects, as well as comparative advantage and specialization effects. We calibrate our model to include each SSA country with nine other major economies for each year between 2000 and 2018. We also do a similar set of calibrations for 11 developing ...
Working Papers , Paper 2418

Working Paper
Markups and misallocation with trade and heterogeneous firms
Weinberger, Ariel (2015-09-01)
With non-homothetic preferences, a monopolistic competition equilibrium is inefficient in the way inputs are allocated towards production. This paper quantifies a gains from trade component that is present only when reallocation is properly measured in a setting with heterogeneous firms that charge variable markups. Due to variable markups, reallocations initiated by aggregate shocks impact allocative efficiency depending on the adjustment of the market power distribution. My measurement compares real income growth with the hypothetical case of no misallocation in quantities. Using firm and ...
Globalization Institute Working Papers , Paper 251

Working Paper
Trade Integration, Global Value Chains, and Capital Accumulation
Zhang, Jing; Yi, Kei-Mu; Sposi, Michael (2020-11-13)
Motivated by increasing trade and fragmentation of production across countries since World War II, we build a dynamic two-country model featuring sequential, multi-stage production and capital accumulation. As trade costs decline over time, global-value-chain (GVC) trade expands across countries, particularly more in the faster growing country, consistent with the empirical pattern. The presence of GVC trade boosts capital accumulation and economic growth and magnifies dynamic gains from trade. At the same time, endogenous capital accumulation shapes comparative advantage across countries, ...
Working Paper Series , Paper WP-2020-26

Working Paper
World Productivity: 1996 - 2014
Esfahani, Mehrdad; Hobijn, Bart; Fernald, John G. (2020-03-13)
We account for the sources of world productivity growth, using data for more than 36 industries and 40 major economies from 1996 to 2014, explicitly taking into account changes in the misallocation of resources in labor, capital, and product markets. Productivity growth in advanced economies slowed but emerging markets grew more quickly which kept global productivity growth relatively constant until around 2010. After that, productivity growth in all major regions slowed. Much of the volatility in world productivity growth reflects shifts in the misallocation of labor across countries and ...
Working Paper Series , Paper 2020-17

Working Paper
Exchange rates dynamics with long-run risk and recursive preferences
Kollmann, Robert (2014-11-01)
Standard macro models cannot explain why real exchange rates are volatile and disconnected from macro aggregates. Recent research argues that models with persistent growth rate shocks and recursive preferences can solve that puzzle. I show that this result is highly sensitive to the structure of financial markets. When just a bond is traded internationally, then long-run risk generates insufficient exchange rate volatility. A long-run risk model with recursive-preferences can generate realistic exchange rate volatility, if all agents efficiently share their consumption risk by trading in ...
Globalization Institute Working Papers , Paper 212

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