MONETARY POLICY, INNOVATION EFFICIENCY, AND TOTAL FACTOR PRODUCTIVITY

Hao-Chang Yang, Chun-Ping Chang, Sahminan - () and Arnita Rishanty
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Hao-Chang Yang: -
Chun-Ping Chang: Shih Chien University
Sahminan -: Bank Indonesia, indonesia

No WP/15/2021, Working Papers from Bank Indonesia

Abstract: This research explores the impact of monetary policy on the growth rate of total factor productivity (TFPG) and innovation efficiency (IE) through panel data of 30 countries from 1983 to 2018 by the bias-corrected fixed-effect dynamic (BCFE) model. We find that tight monetary policy negatively impacts the growth rate of total factor productivity (TFPG) and innovation efficiency (IE), which is still valid after replacing the independent variables and empirical methods. We then perform sub-sample regressions, and the results show that countries with higher government efficiency, higher financial development, and stricter environmental policy can reduce the negative impact of tightening monetary policy on total factor productivity and innovation efficiency. Our research illustrates that a tightening monetary policy not only adversely impacts total factor productivity, but also influences the main driving force of its growth-innovation efficiency.

Keywords: Monetary Policy; Innovation Efficiency; TFP; Government Efficiency bank in emerging markets (search for similar items in EconPapers)
JEL-codes: D24 E22 O31 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2021
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http://publication-bi.org/repec/idn/wpaper/WP152021.pdf First version, 2021 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:wpaper:wp15021

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