American Economic Journal: Macroeconomics
no. 4, October 2022
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.
Caliendo, Lorenzo, Fernando Parro, and Aleh Tsyvinski.
"Distortions and the Structure of the World Economy."
American Economic Journal: Macroeconomics,
General Equilibrium and Disequilibrium: Input-Output Tables and Analysis
General Aggregative Models: Social Accounting Matrix
Business Fluctuations; Cycles
Open Economy Macroeconomics