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R&D and economic growth in a cash-in-advance economy

  • Autores: Angus C. Chu, Guido Cozzi
  • Localización: International economic review, ISSN-e 1468-2354, Vol. 55, Nº. 2, 2014, págs. 507-524
  • Idioma: inglés
  • Texto completo no disponible (Saber más ...)
  • Resumen
    • 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.


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