- Author: Michele Cavallo and Anthony Landry
- Speaker: Michele Cavallo (The Board of Governors, Federal Reserve)
- Speaker: Michele Cavallo (The Board of Governors, Federal Reserve)
- Date: June 26th,
2013
- Venue:
Room D, 5th Floor (GRIPS)
Summary of Paper:
U.S. economic growth has been increasingly dependent on capital-goods imports. This study builds a neoclassical growth model with international trade in capital goods, where agents face exogenous paths of total factor and investment-speci fic productivity. The latter is reflected by the price of capital-goods imports and the price of investment in domestically-produced equipment and software relative to the price of consumption. Observed prices are used to solve for optimal investment decision and understand the underlying sources of growth in the U.S. economy. The model allocation decisions coming from changes in relative prices seems to explain well the dynamics of capital-goods imports in aggregate investment in equipment and software, as well as in U.S. output. By using the model economy, we find the U.S. could have lost more than 20 percent of its growth in output per hour without capital-goods imports technology over the past 20 years.
U.S. economic growth has been increasingly dependent on capital-goods imports. This study builds a neoclassical growth model with international trade in capital goods, where agents face exogenous paths of total factor and investment-speci fic productivity. The latter is reflected by the price of capital-goods imports and the price of investment in domestically-produced equipment and software relative to the price of consumption. Observed prices are used to solve for optimal investment decision and understand the underlying sources of growth in the U.S. economy. The model allocation decisions coming from changes in relative prices seems to explain well the dynamics of capital-goods imports in aggregate investment in equipment and software, as well as in U.S. output. By using the model economy, we find the U.S. could have lost more than 20 percent of its growth in output per hour without capital-goods imports technology over the past 20 years.
