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Jel Classification:L16 

Working Paper
Structural Change and Global Trade

Services, which are less traded than goods, rose from 58 percent of world expenditure in 1970 to 79 percent in 2015. In a trade model featuring nonhomothetic preferences and input-output linkages, we find that such structural change has restrained the growth in world trade to GDP by 16 percentage points over this period. This magnitude is similar to how much declining trade costs have boosted openness. Moreover, structural change dampens the measured gains from trade by incorporating endogenous responses of expenditure shares to the trade regime. Ongoing structural change implies declining ...
Globalization Institute Working Papers , Paper 333

Working Paper
Structural Change and Global Trade

Services, which are less traded than goods, rose from 50 percent of world expenditure in 1970 to 80 percent in 2015. Such structural change restrained "openness"?the ratio of world trade to world GDP?over this period. We quantify this with a general equilibrium trade model featuring non-homothetic preferences and input-output linkages. Openness would have been 70 percent in 2015, 23 percentage points higher than the data, if expenditure patterns were unchanged from 1970. Structural change is critical for estimating the dynamics of trade barriers and welfare gains from trade. Ongoing ...
International Finance Discussion Papers , Paper 1225

Journal Article
Industrial production and capacity utilization: the 2000 annual revision

In late 2000, the Federal Reserve Board published the annual revision of its index of industrial production and related measures of capacity and utilization for the period January 1992 through October 2000. The updated measures reflect the incorporation of newly available, more comprehensive source data, the introduction of new production series, and changes in methods. For this revision, two new years of comprehensive data on manufacturing output became available; otherwise, the updating of the data was typical of annual revisions. ; Total industrial output has increased, on average, 5.1 ...
Federal Reserve Bulletin , Volume 87 , Issue Mar , Pages 132-148

Journal Article
Industrial production and capacity utilization: the 2002 historical and annual revision

In late 2002, the Board of Governors of the Federal Reserve System published a revision to its index of industrial production and the related measures of capacity utilization. The primary feature of the revision was the reclassification back to 1972 of production and capacity indexes for individual industries from the Standard Industrial Classification System to the North American Industry Classification System. The revision also reflects the incorporation of newly available, more comprehensive source data, and it introduced improved methods for measuring the annual real output of ...
Federal Reserve Bulletin , Volume 89 , Issue Apr

Who bears the cost of a change in the exchange rate? The case of imported beer

This paper quantifies the welfare effects of a change in the nominal exchange rate using the example of the beer market. I estimate a structural econometric model that makes it possible to compute manufacturers' and retailers' pass-through of a nominal exchange-rate change, without observing wholesale prices or firms' marginal costs. I conduct counterfactual experiments to quantify how the change affects domestic and foreign firms' profits and domestic consumer welfare. The counterfactual experiments show that foreign manufacturers bear more of the cost of an exchange-rate change than do ...
Staff Reports , Paper 179

Working Paper
Macroeconomic Changes with Declining Trend Inflation: Complementarity with the Superstar Firm Hypothesis

Recent studies indicate that, since 1980, the average markup and the profit share of income have increased, while the labor share and the investment share of spending have decreased. We examine the role of monetary policy in these changes as inflation has concurrently trended down. In a simple staggered price model with a non-CES aggregator of differentiated goods, a decline in trend inflation as measured since 1980 can account for a substantial portion of the changes. Moreover, introducing a rise in the productivity of “superstar firms” in the model can better explain not only the ...
Working Papers , Paper 202035

Working Paper
Exchange rate pass-through, domestic competition and inflation -- evidence from the 2005/08 revaluation of the Renminbi

How important is the effect of exchange rate fluctuations on the competitive environment faced by domestic firms and the prices they charge? To answer this question, this paper examines the 17 percent appreciation of the yuan against the U.S. dollar from 2005 to 2008. In a monthly panel covering 110 sectors, a 1 percent appreciation of the Yuan increases U.S. import prices by roughly 0.8 percent. It is then shown that import prices, in turn, pass through into producer prices at an average rate of roughly 0.7, implying that a 1 percent Yuan appreciation increases the average U.S. producer ...
Globalization Institute Working Papers , Paper 68

Working Paper
Price Dynamics with Customer Markets

We study a tractable model of firm price setting with customer markets and empirically evaluate its predictions. Our framework captures the dynamics of customers in response to a change in the price, describes the behavior of optimal prices in the presence of customer acquisition and retention concerns, and delivers a general equilibrium model of price and customer dynamics. We exploit novel micro data on purchases from a panel of households from a large U.S. retailer to quantify the model and compare it to the counterfactual benchmark of the standard monopolistic competition setting. We show ...
Working Paper , Paper 14-17

Working Paper
Firm Entry and Macroeconomic Dynamics: A State-level Analysis

Using an annual panel of U.S. states over the period 1982-2014, we estimate the response of macroeconomic variables to a shock to the number of new firms (startups). We find that these shocks have significant effects that persist for many years on real gross domestic product, productivity and population. This is consistent with simple models of firm dynamics where a ?missing generation? of firms affects productivity persistently.
Working Paper Series , Paper WP-2016-1

Working Paper
The role of two frictions in geographic price dispersion: when market friction meets nominal rigidity

This paper empirically investigates and theoretically derives the implications of two frictions, market friction and nominal rigidity, on the dynamic properties of intra-national relative prices, with an emphasis on the interaction of the two frictions. By analyzing a panel of retail prices of 45 products for 48 cities in the U.S., we make two major arguments. First, the effect of each type of friction on the dynamics of intercity price gaps is quite different. While market frictions arising from physical distance and transportation costs contribute significantly to volatile and persistent ...
Globalization Institute Working Papers , Paper 219


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