A. Chu
R&D and Economic Growth in a Cash-in-Advance Economy
Chu, A.; Cozzi, G.
Authors
G. Cozzi
Abstract
R&D investment has well-known liquidity problems, with potentially important consequences. In this study, we analyze the effects of monetary policy on economic growth and social welfare in a Schumpeterian growth model with cash-in-advance (CIA) constraints on R&D investment, consumption, and manufacturing. Our main results can be summarized as follows. Under the CIA constraints on R&D and consumption (the CIA constraint on manufacturing), an increase in the nominal interest rate decreases (increases) R&D and economic growth. We also analyze the optimality of Friedman rule and find that Friedman rule can be suboptimal due to a unique feature of the Schumpeterian model.
Citation
Chu, A., & Cozzi, G. (2014). R&D and Economic Growth in a Cash-in-Advance Economy. International Economic Review, 55(2), 507-524. https://doi.org/10.1111/iere.12059
Journal Article Type | Article |
---|---|
Online Publication Date | Apr 22, 2014 |
Publication Date | May 1, 2014 |
Deposit Date | Jun 2, 2014 |
Journal | International Economic Review |
Print ISSN | 0020-6598 |
Electronic ISSN | 1468-2354 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 55 |
Issue | 2 |
Pages | 507-524 |
DOI | https://doi.org/10.1111/iere.12059 |
Public URL | https://durham-repository.worktribe.com/output/1460939 |
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