This paper develops a model to assess the quantitative effect of entry cost and financial friction on cross-country income and total factor productivity (TFP) differences. The main focus is on the interaction between entry cost and financial friction. The model is calibrated to match establishment-level statistics for the U.S. economy assuming a perfect financial market. The quantitative analys...

This paper examines the effect of foreign direct investment (FDI) on growth by focusing on the complementarities between FDI inflows and financial markets. In our earlier work, we find that FDI is beneficial for growth only if the host country has well-developed financial institutions. In this paper, we investigate whether this effect operates through factor accumulation and/or improvements in ...

Article history: Received 1 July 2010 Received in revised form 6 March 2013 Accepted 6 March 2013 Available online 16 March 2013 We investigate the transmission mechanism of monetary policy in China over the past decades with emphasis on the post-Asian crisis period. A factor-augmented VAR method is used to study the effectiveness of monetary policy instruments in stabilizing the Chinese econom...

f rom the viewpoint of economic theories, total factor productivity (tfp) is the most important component that leads to economic growth and development. the main purpose of this study was to evaluate the impact of knowledge-based economy on total factor productivity in the member countries of the middle east and north africa (mena) region. for this purpose, the panel data regression analysis ha...

This paper argues that self-fulfilling beliefs in credit conditions can generate endogenously persistent business cycle dynamics. We develop a tractable dynamic general equilibrium model with idiosyncratic firm productivity shocks. Capital from less productive firms is lent to more productive ones in the form of credit secured by collateral and also as unsecured credit based on reputation. A dy...

In this paper I analyze the impact of increasing government infrastructure investment by using existing large foreign exchange reserves in a fully optimizing model matching the Chinese economy. Even though the private investment falls in the nontradable sector, real expenditure and money balance decrease in the short run, the infrastructure investment greately enhances the efficiency and produc...

Developing countries typically exhibit small firm size, high dispersion of firm-level productivity, and low trade-to-output ratios. They also tend to export particularly less to more distant and smaller markets. To rationalize these facts, this paper develops a flexible, multi-country general equilibrium model of production and trade in which heterogeneous producers face both domestic size-depe...

Developing countries typically exhibit small firm size, high dispersion of marginal productivity of factors across firms, and low trade-to-output ratios. They also tend to export particularly less to more distant and smaller markets. To rationalize these facts, this paper develops a flexible, multi-country general equilibrium model of production and trade in which heterogeneous producers face b...

Evidence shows that asset price bubbles typically precede financial crises and financial crises are accompanied by the collapse of bubbles. In addition, stock market booms and busts are typically associated with credit market booms and busts. The recent US housing and stock market bubbles and the subsequent Great Recession that began in late 2007 provide an example. The stock market booms in th...

In the model where the choice of technology by firms endogenously determines productivity differences, we investigate the link between factor endowment and the productivity both in the firm and industry levels. We find among others that firms in capital-abundant countries tend to adopt new advanced technologies more in their production processes, but opening to international trade will equalize...