Inflation, Innovation, and Technology Transfer in an Open Economy with Variety Expansion

Hung-Ju Chen (), Hao Guo (), Chien-Yu Huang () and Yibai Yang ()
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Hung-Ju Chen: National Taiwan University
Hao Guo: Liaoning University
Chien-Yu Huang: International University of Japan
Yibai Yang: University of Macau

No EMS_2026_10, Working Papers from Research Institute, International University of Japan

Abstract: This study explores the cross-country effects of inflation on innovation and technology transfer in a North-South variety-expansion model. We find that higher southern inflation causes a permanent increase in the North-South relative wage ratio, a temporary decrease in the northern innovation rate, and a permanent decrease in technology transfer. Higher northern inflation causes a permanent decrease in the North-South relative wage ratio, a temporary decrease in the northern innovation rate, and a permanent decrease (increase) in technology transfer if the southern population is sufficiently small (large). We calculate the model to the China-US data to justify the model implications.

Keywords: Inflation; Innovation; North-South product cycles; R&D; Technology transfer (search for similar items in EconPapers)
JEL-codes: E41 F43 O30 O40 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2026-06
New Economics Papers: this item is included in nep-mon
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