This paper provides an explanation for the secular increase in the price of services relative to that of manufactured goods that relies on capital accumulation rather than on an exogenous total factor productivity growth differential. The key assumptions of the two-sector, intertemporal...

This paper identifies a new mechanism leading to inefficiency in capital reallocation at theextensive margin when an economy experiences a sectoral boom. I argue that imperfectionsin the financial market and capital barriers to entry in the booming sector create amisallocation of managerial...

In the last few decades, real GDP growth and investment in advanced countries have declined in tandem. This slowdown was not the result of weak demand (there has been no shift along the Okun curve), but of a decline in potential output growth (which has shifted the Okun curve to the left). We...

For US postwar data, the paper explains central consumption, labor, investment and output correlations and volatilities along with output growth persistence by including a human capital investment sector and a variable physical capital utilization rate. Strong internal "amplication" results from...

This paper considers the implications for developing countries of a new wave of technological change that substitutes pervasively for labor. It makes simple and plausible assumptions: the AI revolution can be modeled as an increase in productivity of a distinct type of capital that substitutes...

Bank stress tests of climate change risks are relatively new, but are rapidly proliferating. The IMF and World Bank staff collaborated to develop an experimental macro scenario stress testing approach to examine physical risks for banks by building a dynamic stochastic general equilibrium model...

Natural resource revenues provide a valuable source to finance public investment in developing countries, which frequently face borrowing constraints and tax revenue mobilization problems. This paper develops a dynamic stochastic small open economy model to analyze the macroeconomic effects of...

This paper formally identifies an important role of banks: Banks competitively internalize production externalities and facilitate economic growth. I formulate a canonical growth model with externalities as a game among consumers, firms, and banks. Banks compete for deposits to seek monopoly...

The paper discusses the impact and implications of Korean unification by setting up a two-region endogenous growth model. The numerical solutions are based on the formal analytical model, and have been calibrated so that they reflect the observed features of the North and South Korean economies....

This paper examines the extent to which there has been convergence in real per capita incomes across developing countries during the last two decades. In the analysis particular emphasis is placed on the separate roles played by private and public sector investment in determining both the extent...