Monetary Policy, Financial Frictions, and Heterogeneous R&D Firms in an Endogenous Growth Model

Takeo Hori

Scandinavian Journal of Economics, 2020, vol. 122, issue 4, 1343-1373

Abstract: Motivated by empirical facts, I construct an endogenous growth model in which heterogeneous research and development (R&D) firms are financially constrained and use cash to finance R&D investments. I also examine the optimal monetary policy. The effects of financial constraint crucially depend on whether R&D firms are homogeneous or heterogeneous regarding R&D productivity. If R&D firms are homogeneous, then the zero nominal interest rate (i.e., the Friedman rule) is always optimal under severe financial constraint. Heterogeneity in R&D productivity leads to the opposite result. With heterogeneity, severe financial constraint makes the strictly positive nominal interest rate welfare‐improving under a plausible condition.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://doi.org/10.1111/sjoe.12387

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:122:y:2020:i:4:p:1343-1373

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520

Access Statistics for this article

Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

More articles in Scandinavian Journal of Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().