Kei-Mu Yi holds the M. D. Anderson Chair in Economics at the University of Houston. He also serves as a consultant in the Research Department of the Federal Reserve Bank of Minneapolis, where he held the positions of senior vice president and director of Research, as well as special policy advisor to the president, from August 2010 to January 2016.
Before joining the Federal Reserve Bank of Minneapolis, Yi was vice president and head of Monetary and Macroeconomic Research at the Federal Reserve Bank of Philadelphia. Yi joined the Federal Reserve Bank of Philadelphia in 2004, following seven years of service at the Federal Reserve Bank of New York, where he was a research officer in the Bank’s International Research unit. Prior to joining the Federal Reserve Bank of New York, he was an assistant professor of economics at Rice University. Over the years, Yi has also taught at the Wharton School of the University of Pennsylvania, as well as at Columbia University, New York University, the University of Virginia, and the University of Iowa.
Yi’s research currently focuses on issues relating to international trade and long-run growth; structural change in an open economy; the gains from international trade, and vertical specialization / fragmentation of production. He has published articles on the importance of vertical production linkages for international trade flows and is considered one of the founders of the analysis of “offshoring.” His publications appear in prestigious economics journals such as the American Economic Review and the Journal of Political Economy. He received a B.S. in economics from MIT and a Ph.D. in economics from the University of Chicago.
Long-term interest rates have a crucial influence on virtually all major financial decisions faced by households, businesses and governments. This paper reviews several decades of data on long-term rates internationally, explores several factors that determine them and discusses implications of this evidence.
The data indicate declining long-term rates since the 1980s, converging internationally at very low levels. This implies that the rate decline is not due to the Great Recession or to the early 2000s downturn. It further suggests a higher likelihood than before of hitting the zero bound on nominal interest rates as well as sustained rate convergence as global financial integration proceeds.
Furthermore, evidence of a downward trend in global fixed investment, coupled with the main finding of declining long-term interest rates, suggests that forces leading to declining global investment demand may be more important than those leading to increased saving in explaining current trends in long-term rates.
China’s impressive economic growth since the 1980s raises the question of how much richer it will become over future decades. Its growing share of the world economy affects other national economies. Understanding the future course of the Chinese economy is therefore important for both fiscal and monetary policymaking in the United States and elsewhere.
Using fundamental growth theory, data from China and from Korea and Japan’s similar “miracle” growth experiences, we provide a suggestive calculation for China’s future per capita income. Our ballpark estimate is that China’s per capita income relative to that of the United States will grow by a factor of two to three over the next half-century.
We study the importance of international trade in structural change. Our framework has both productivity and trade cost shocks, and allows for non-unitary income and substitution elasticities. We calibrate our model to investigate South Korea’s structural change between 1971 and 2005. We find that the shock processes, propagated through the model’s two main transmission mechanisms, non-homothetic preferences and the open economy, explain virtually all of the evolution of agriculture and services labor shares, and the rising part of the hump-shape in manufacturing. Counterfactual exercises show that the role of the open economy is quantitatively important for explaining South Korea’s structural change.