Macroeconomic instability and the incentive to innovate

Serena Masino

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the channels through which macroeconomic volatility prevents or hinders innovative investment undertakings financed by the domestic business sector. The analysis is based on a sample of 48 countries, representing all levels of development, and uses various measures of macroeconomic instability, such as political, real and monetary volatility. The results suggest a negative impact of macroeconomic instability on the share of R&D financed by the domestic business sector. These outcomes highlight the desirability of counter-cyclical policy interventions aiming to prevent the avoidance or abandonment of private R&D undertakings in unstable macroeconomic environments.

Keywords: Macroeconomic Volatility; Political Instability; R&D Investment; Innovation (search for similar items in EconPapers)
JEL-codes: C33 O11 O31 O33 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-cwa, nep-ino and nep-mac
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https://mpra.ub.uni-muenchen.de/41000/1/MPRA_paper_41000.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38830

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