• Yuta Takahashi

     

    Phd student in Northwestern University

    My interests include Macroeconomics and International trade

     

    E-mail : takahashi[at]u.northwestern.edu

  • Works in progress

    • Winners and Losers in trade : An Quantitative Analysis

  • Working Papers

    • Universal Gravity with Allen and Arkolakis
    • Layoff Risk, Welfare Cost of Business Cycles, and Monetary Policy with Berger, Dew-Becker, and Schmidt

    Universal Gravity with Treb Allen and Costas Arkolakis Revision requested by Journal of Political Economy

    Abstract

     

    What is the best way to reduce trade frictions when resources are scarce? To answer this question, we develop a framework that nests previous general equilibrium gravity models and show that the macro-economic implications of these various models depend crucially on two key model parameters, which we term the “gravity constants.” Based only on the value of the gravity constants, we derive sufficient conditions for the existence and uniqueness of the trade equilibrium and, given observed trade flows, completely characterize all comparative statics for any change in bilateral trade frictions. We then develop a methodology for estimating these gravity constants without needing to assume a particular micro-foundation of the gravity trade model. Finally, we use these results to derive the set of trade friction reductions that (to a first order) maximize welfare gains given an arbitrary constraint.

     

    Abstract

    The single strongest predictor of changes in the Fed Funds rate in the period 1982-2007 was the level of the firing rate (initial unemployment claims divided by total employment). This fact is puzzling from the perspective of standard monetary models because the welfare costs of stabilizing employment fluctuations are small in these models.We argue that these welfare costs are small because standard models do not capture the fact that when people lose their jobs, they tend to experience large, permanent, and largely uninsurable income losses. We augment a standard New Keynesian model with a labor market featuring endogenous countercyclical firing by firms that is associated with permanent reductions in human capital. In our benchmark calibration, welfare may be increased by 2 percent of lifetime consumption when the central banks policy rule responds to the firing rate. This provides a quantitative rationale for the
    Federal Reserve's dual mandate.