Inflation, Complexity and Endogenous Growth

Tiago Neves Sequeira, Pedro Gil and Oscar Afonso
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Tiago Neves Sequeira: CeBER and Faculty of Economics, University of Coimbra

No 2019-04, CeBER Working Papers from Centre for Business and Economics Research (CeBER), University of Coimbra

Abstract: In this article, we argue that inflation increases complexity pertaining to knowledge production (or R&D). Then, we expand a recently developed complexity index based on entropy to include the effect of inflation. As a result of this new mechanism in an endogenous growth model, inflation is no longer superneutral. In the model, inflation can decrease economic growth in a nonlinear way, a sudden upward shock on inflation can severely hurt economic growth and an inflation cut can be responsible for a take-off. These effects are illustrated quantitatively.

Keywords: Inflation; endogenous economic growth; complexity effects; entropy. (search for similar items in EconPapers)
JEL-codes: E22 O10 O30 O40 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2019-09
New Economics Papers: this item is included in nep-fdg, nep-gro and nep-mac
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Citations: View citations in EconPapers (1)

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Journal Article: Inflation, complexity and endogenous growth (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:gmf:papers:2019-04

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