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Neoclassical Growth in an Interdependent World

Author

Listed:
  • Benny Kleinman

    (University of Chicago)

  • Ernest Liu

    (Princeton University and NBER)

  • Stephen J. Redding

    (Princeton University, NBER and CEPR)

  • Motohiro Yogo

    (Princeton University and NBER)

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.

Suggested Citation

  • Benny Kleinman & Ernest Liu & Stephen J. Redding & Motohiro Yogo, 2023. "Neoclassical Growth in an Interdependent World," Working Papers 318, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:318
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    References listed on IDEAS

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    Cited by:

    1. Carlos G'oes, 2024. "Trade, Growth, and Product Innovation," Papers 2406.08727, arXiv.org.

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    More about this item

    Keywords

    Economic Growth; International Trade; Capital Flow;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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