 The long-run effects of monetary policy: The role of R&D investment in economic growthM. Jahangir Alam and Eskander Alvi Economic Modelling, 2024, vol. 137, issue C Abstract: This study examines the long-term economic effects of monetary policy, focusing on its impact on research and development (R&D) investment and firm productivity. Using data from Compustat, we analyze productivity’s response to monetary policy shocks, with an emphasis on the role of firm size, age, and leverage as indicators of credit constraints. We use high-frequency financial market data to identify monetary policy shocks through a local projections–instrumental variables (LP-IV) approach. Our findings reveal that smaller, younger, and less leveraged firms are more adversely affected by contractionary monetary policies, suggesting a significant impact on their R&D investments and subsequent productivity, particularly in the manufacturing sector. The findings also highlight that tight monetary policy has a persistent negative impact on firm productivity via reduced R&D investment, underscoring the need for policies like R&D subsidies to support long-term economic growth. Keywords: Monetary policy; Long-term effects; R&D; Productivity; LP-IV (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:137:y:2024:i:c:s0264999324001123 DOI: 10.1016/j.econmod.2024.106756 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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