A R&D Based Real Business Cycle Model

Ka Wai Terence Fung, Chi Keung Lau and Kwok Ho Chan

MPRA Paper from University Library of Munich, Germany

Abstract: The New Keynesian Real Business Cycle model with staggered price adjustment is augmented with a R&D producing sector. Two sources of economic shocks are considered, namely random paritcipation (perturbances to value of alternative investment opportunities in another sector) and financial intermediation (shocks to the cost of raising capital in the financial intermediation market). We find that, when comparing to the baseline model, both models can explain pro-cyclical R&D spending. Additionally, the investment oversensitivity problem is corrected. However, only the financial intermediation model is consistent with the observed finding that volatility of R&D is larger than that of investment and output.

Keywords: Endogenous growth model; real business cycle; asymmetric information; research and development (search for similar items in EconPapers)
JEL-codes: E30 O3 O30 O4 O40 O42 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-ino and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: An R&D-based real business cycle model (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:52571

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