Distortions and the Structure of the World Economy

Lorenzo Caliendo, Fernando Parro, Aleh Tsyvinski

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We model the world economy as one system of endogenous input-output relationships subject to frictions and study how the world’s input-output structure and world’s GDP change due to changes in frictions. We derive a sufficient statistic to identify frictions from the observed world input-output matrix, which we fully match for the year 2011. We show how changes in internal frictions impact the whole structure of the world’s economy and that they have a much larger effect on world’s GDP than external frictions. We also use our approach to study the role of internal frictions during the Great Recession of 2007–2009.

Original languageEnglish
Pages (from-to)274-308
Number of pages35
JournalAmerican Economic Journal: Macroeconomics
Volume14
Issue number4
DOIs
StatePublished - 2022
Externally publishedYes

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