Macroeconomic Volatility, Institutional Instability and the Incentive to Innovate

Serena Masino

Review of Development Economics, 2015, vol. 19, issue 1, 116-131

Abstract: This study investigates the channels through which macroeconomic and institutional instability hinders innovative investment undertakings financed by the domestic private sector. The analysis is based on a sample of 44 countries and considers various instability dimensions. The results suggest a negative impact of real, monetary and political instability on the aggregate level of R&D financed by the business sector. Thus, highlighting the importance of stable macro-institutional environments in preventing avoidance or abandonment of private innovation undertakings.

Date: 2015
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