The impact of economic policy uncertainty and monetary policy on R&D investment: An option pricing approach

Luis P. de la Horra, Javier Perote and Gabriel de la Fuente

Economics Letters, 2022, vol. 214, issue C

Abstract: This paper adopts a real options approach to investigate the effects of economic policy uncertainty (EPU) and monetary policy on R&D investment. Using a panel of U.S. firms over the period 2000–2019, we show that higher (lower) EPU and contractionary (expansionary) monetary policy exert a positive (negative) and significant influence on R&D investment. Our findings shed light on the counter-intuitive behavior of R&D investments, which may help policymakers to anticipate such collateral effects.

Keywords: R&D; Monetary policy; Economic policy uncertainty; Real options; Panel data (search for similar items in EconPapers)
JEL-codes: C23 D81 E22 E52 O30 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:214:y:2022:i:c:s0165176522000787

DOI: 10.1016/j.econlet.2022.110413

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