Project Showcase
Abstract: This paper develops a two-country general equilibrium model of technology sharing to study world trade patterns. A technologically advanced country enjoys the benefit of comparative advantage due to her access to superior technology. The static model presented in this paper comes out with structural equations that show if a country with advanced technology shares her exclusive technology know-how with a technologically less-advanced country, up to a certain level, both of them will get higher gains from trade. A novel contribution of this paper is to determine the endogenous technology sharing that provides the highest level of utility to the technology leader.
Research on Progress:
The Role of Investment Composition to Solve the Backus- Puzzle
With Rajesh Singh
Abstract: This paper develops a two-country international business cycle model, in which sector-specific investment goods consist of inputs from all sectors, to explain a central puzzle in international economics: the correlation between the relative consumption and real exchange rate is typically negative. The model is augmented with an internationally incomplete asset market and distribution services to carry out traded goods to consumers. Standard models establish the negative correlation for low trade elasticity of substitution, while the higher values of the trade elasticities are complemented by nearly permanent productivity shocks. The numerical simulations in this paper show that the multi-sectoral investment composition model outperforms the standard ones by resolving this relative consumption-real exchange rate anomaly for the higher value trade elasticities, in line with the micro-estimates, using fairly persistent productivity shocks. Furthermore, the cross-country consumption correlation falls below that of output and thus solves the quantity anomaly, another major puzzle in international macroeconomics. There are no qualitative changes in the results when distribution services are abstracted away from the model.