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Working Paper
Declining Search Frictions, Unemployment, and Growth Revisited
Córdoba, Juan C.; Isojärvi, Anni T.; Li, Haoran (2025-10-31)
This paper revisits the conditions under which search models generate balanced growth paths (BGPs)—equilibria where unemployment, vacancies, and job flows remain steady as search frictions decline. Martellini and Menzio (2020) claim that such paths exist only when matches are “inspection goods” and match quality follows a Pareto distribution. We show that these conditions are sufficient but not necessary. Their implementation assumes a strong form of stationarity—requiring the endogenous distribution of match qualities to remain invariant under proportional scaling. This restriction ...
Finance and Economics Discussion Series , Paper 2025-098

Working Paper
From Population Growth to TFP Growth
Sanchez, Juan M.; Inokuma, Hiroshi (2023-03-27)
Using a firm-dynamics model that has been extended to include endogenous growth, we examine how population growth influences total factor productivity (TFP) growth. The most important theoretical result is that the growth rate of surviving old businesses is a "sufficient statistic" to determine the direction and the magnitude of the impact of population growth on TFP growth. Following that, the model is calibrated for Japan and the United States. The main finding of examining balanced growth paths (BGPs) with various rates of population growth is that the effect on TFP growth is sizable. ...
Working Papers , Paper 2023-006

Report
The equilibrium real policy rate through the lens of standard growth models
Wang, J. Christina; Sichel, Daniel E. (2017-11-17)
The long-run equilibrium real policy rate is a key concept in monetary economics and an important input into monetary policy decision-making. It has gained particular prominence lately as the Federal Reserve continues to normalize monetary policy. In this study, we assess the evolution, current level, and prospective values of this equilibrium rate within the framework of standard growth models. Our analysis considers as a baseline the single-sector Solow model, but it places more emphasis on the multi-sector neoclassical growth model, which better fits the data over the past three decades. ...
Current Policy Perspectives , Paper 17-6

Working Paper
Markets, Externalities, and the Dynamic Gains of Openness
Monge-Naranjo, Alexander (2016-10-01)
Inflows of foreign knowledge are the key for developing countries to catch up with the world technology frontier. In this paper, I construct a simple tractable model to analyze (a) the incentives of foreign firms to bring their know-how to a developing country and (b) the incentives of domestic firms to invest in their own know-how, given the exposure to foreign ideas and competition. The model embeds two diffusion mechanisms typically considered separately in the literature: externalities and markets. The dynamic gains of openness can be substantial under either mechanism, but their relative ...
Working Papers , Paper 2016-23

Working Paper
Trade Risk and Food Security
Leibovici, Fernando; Adamopoulos, Tasso (2024-02)
We study the role of international trade risk for food security, the patterns of production and trade across sectors, and its implications for policy. We document that food import dependence across countries is associated with higher food insecurity, particularly in low-income countries. We provide causal evidence on the role of trade risk for food security by exploiting the exogeneity of the Ukraine-Russia war as a major trade disruption limiting access to imports of critical food products. Using micro-level data from Ethiopia, we empirically show that districts relatively more exposed to ...
Working Papers , Paper 2024-004

Working Paper
Knowledge Diffusion, Trade and Innovation across Countries and Sectors
Santacreu, Ana Maria; Li, Nan; Cai, Jie (2019-11-18)
We provide a unified framework for quantifying the cross country and cross-sector interactions among trade, innovation, and knowledge diffusion. We study the effect of trade liberalization in a multi-country, multi-sector endogenous growth model in which comparative advantage and the stock of knowledge are determined by innovation and diffusion. A reduction in trade costs induces a re-allocation of comparative advantage in production and innovation across sectors, which translates into higher growth along the counterfactual balanced growth path (BGP). Heterogeneous knowledge diffusion across ...
Working Papers , Paper 2017-29

Working Paper
Natural Resources and Global Misallocation
Santaeulalia-Llopis, Raul; Monge-Naranjo, Alexander; Sanchez, Juan M. (2015-07-07)
We explore the efficiency in the allocation of physical capital and human capital across countries. The observed marginal products can differ across countries because of differences in technology (i.e. production functions) and in distortions (i.e. differences in use of factors) across countries. To identify differences in technology, we use new data and propose a simple method to estimate output shares of natural resources, and thus adjust the estimated marginal products of physical and human capital. With a sample of 79 countries from 1970 to 2005, we find that the world has decidedly moved ...
Working Papers , Paper 2015-13

Journal Article
Should Capital Flow from Rich to Poor Countries?
Santaeulalia-Llopis, Raul; Monge-Naranjo, Alexander; Sanchez, Juan M.; Sohail, Faisal (2019)
Are human and physical capital stocks allocated efficiently across countries? To answer this question, we need to differentiate misallocation from factor intensity differences. We use newly available estimates on factor shares from Monge-Naranjo, Santaeullia-Llopis, and Snchez (2019) to correctly measure the factor shares of physical and human capital for a large number of countries and periods. We find that the global efficiency losses of the misallocation of human capital are much more substantial than those of physical capital, amounting to 40 percent of the world?s output. Moreover, ...
Review , Volume 101 , Issue 4 , Pages 277-295

Report
Intangible Capital and Measured Productivity
McGrattan, Ellen R. (2017-03-06)
Because ?rms invest heavily in R&D, software, brands, and other intangible assets?at a rate close to that of tangible assets?changes in measured GDP, which does not include all intangible investments, understate the actual changes in total output. If changes in the labor input are more precisely measured, then it is possible to observe little change in measured total factor productivity (TFP) coincidentally with large changes in hours and investment. This mismeasurement leaves business cycle modelers with large and unexplained labor wedges accounting for most of the ?uctuations in aggregate ...
Staff Report , Paper 545

Working Paper
ICT Services and their Prices: What do they tell us about Productivity and Technology?
Byrne, David M.; Corrado, Carol (2017-02-10)
This paper reassesses the link between ICT prices, technology, and productivity. To understand how the ICT sector could come to the rescue of a whole economy, we extend a multi-sector model due to Oulton (2012) to include ICT services (e.g., cloud services) and use it to calibrate the steady-state contribution of the ICT sector to growth in aggregate U.S. labor productivity. Because ICT technologies diffuse through the economy increasingly via purchases of cloud and data analytic services that are not fully accounted for in the standard narrative on ICT's contribution to economic growth, the ...
Finance and Economics Discussion Series , Paper 2017-015

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