Neoclassical growth in an interdependent world

Benny Kleinman, Ernest Liu, Stephen Redding and Motohiro Yogo

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We generalize the closed-economy neoclassical growth model (CNGM) to allow for costly goods trade and capital flows with imperfect substitutability between countries. We develop a tractable, multi-country, quantitative model that matches key features of the observed data (e.g., gravity equations for trade and capital holdings) and is well suited for analyzing counterfactual policies that affect both goods and capital market integration (e.g., U.S.-China decoupling). We show that goods and capital market integration interact in non-trivial ways to shape impulse responses to counterfactual changes in productivity and goods and capital market frictions and the speed of convergence to steady-state.

Keywords: economic growth; international trade; capital flows (search for similar items in EconPapers)
JEL-codes: F10 F21 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2023-12-05
New Economics Papers: this item is included in nep-dge, nep-gro, nep-ifn, nep-int and nep-opm
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Downloads: (external link)
http://eprints.lse.ac.uk/121381/ Open access version. (application/pdf)

Related works:
Working Paper: Neoclassical growth in an interdependent world (2023)
Working Paper: Neoclassical Growth in an Interdependent World (2023)
Working Paper: Neoclassical Growth in an Interdependent World (2023)
Working Paper: Neoclassical Growth in an Interdependent World (2023)
Working Paper: Neoclassical Growth in an Interdependent World (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121381

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