Neoclassical growth in an interdependent world

Kleinman, Benny, Liu, Ernest, Redding, Stephen J. and Yogo, Motohiro (2023) Neoclassical growth in an interdependent world. CEP Discussion Papers (CEPDP1965). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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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.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2023 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance H Social Sciences > HF Commerce
JEL classification:	F - International Economics > F1 - Trade > F10 - General F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
Date Deposited:	16 Jan 2024 09:51
Last Modified:	16 Jan 2024 10:57
URI:	http://eprints.lse.ac.uk/id/eprint/121381

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