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Working paper
"The World Has More Than Two Countries: Implications of Multi-Country International Real Business Cycle Models"
- The cross-country correlations of international real business cycle models depend critically on the number of countries in the models. A positive productivity shock in one country will stimulate investment in the country that has experienced the shock, while reducing internal investment in the other countries, which will then simultaneously experience a slump. This comovement mechanism is absent in two-country models.
- Current version (Jun 2011)
"Trade Costs and Business Cycle Transmission in a Multi-country, Multi-sector Model"
- This paper analyzes how trade contributes to the international business cycle transmission. I construct a multi-country, multi-sector real business cycle model that is a dynamic stochastic extension of the theoretical gravity equation model (Anderson, 1979). In the model, trade patterns are determined by Ricardian comparative advantage. A productivity shock is transmitted across countries through temporary changes in trade patterns, which are driven by temporary changes in the comparative advantage. Lower trade costs facilitate this transmission effect, leading in turn to higher business cycle comovement. By exploiting the model structure and trade flow data, I estimate exporter- importer- product- year-specific trade costs for 10 single-digit Standard International Trade Classification categories for 21 OECD countries from 1962 to 2000. The cross-sectional variation in the estimated trade costs generates cross-country variations in trade and fluctuations. The model accounts for the data better than typical models in the literature along several dimensions: the variation in bilateral trade, the correlations between output and trade flows, the business cycle comovement across countries, and the association between bilateral trade and comovement. The multiplicity of countries in the model affects the implication of the trade-comovement association. The parameterized model suggests a reduction in trade costs increases the magnitude of comovement, but does not greatly increase volatilities of output and consumption.
- Current version (Nov 2009)
"Inventory-Theoretic Model of Money Demand, Multiple Goods, and Price Dynamics" (with Nao Sudo)
- We construct a two-goods inventory-theoretic money demand model, and find that the model implies, in a monetary contraction, the decline in the prices of low cash-intensity goods, durables, or luxuries outpaces that of high cash-intensity goods, non-durables, or necessities. Using U.S. data, we show that our model's predictions are consistent with the data.
- Current version (Dec 2010)
Published paper
"Aggregate Returns to Social Capital: Estimates Based on the Augmented Augmented-Solow Model"
(with Yasuyuki Sawada), 2009, Journal of Macroeconomics, 31: 376-93.
- We extend the augmented-Solow model to estimate the aggregate output elasticity and depreciation rate of social capital that characterize aggregate returns. The estimated output elasticity is approximately 0.1. While social capital positively affects economic growth, the magnitude is much smaller than that of other production inputs. The estimated depreciation rate is at least 10% per annum, which is higher than that of physical capital. The median value of the implied aggregate return of social capital is approximately 19.11% at the global level. In OECD countries, it is likely to be considerably smaller than the individual returns, suggesting the fallacy of composition. While there is no systematic relationship between GDP per capita and returns to physical or human capital, the aggregate returns to social capital seem to be negatively related to the level of development.
- Working paper version (CIRJE discussion paper, University of Tokyo, Apr 2006)
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