EconPapers    
Economics at your fingertips  
 

Innovation and imitation in a product-cycle model with FDI and cash-in-advance constraints

Hung-Ju Chen

Journal of Macroeconomics, 2018, vol. 58, issue C, 91-114

Abstract: This paper analyzes the long-run effects of monetary policy on innovation and imitation in a North–South product-cycle model with foreign direct investment (FDI) and separate cash-in-advance (CIA) constraints on innovative R&D, adaptive R&D, and imitative R&D. We find that if the CIA constraint is applied to innovative R&D, then a decrease in the Northern nominal interest rate will reduce the rate of Northern innovation and the extent of FDI while raising the rate of Southern imitation and the North–South wage gap. Regarding the effects of the Southern monetary policy, the object that is liquidity-constrained plays a significant role. If adaptive (imitative) R&D is subject to the CIA constraint, then a decrease in the Southern nominal interest rate will reduce (raise) the rate of Northern innovation and the extent of FDI while raising (reducing) the rate of Southern imitation. The stability of the long-run equilibrium is examined. We also analyze the responses of social welfare for Northern and Southern consumers to monetary policy.

Keywords: CIA constraints; FDI; Imitation; Monetary policy; R&D (search for similar items in EconPapers)
JEL-codes: E52 F23 O31 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0164070418300119
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Innovation and imitation in a product-cycle model with FDI and cash-in-advance constraints (2015) Downloads
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:eee:jmacro:v:58:y:2018:i:c:p:91-114

DOI: 10.1016/j.jmacro.2018.08.008

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-19
Handle: RePEc:eee:jmacro:v:58:y:2018:i:c:p:91-114