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Innovation, Productivity, and Monetary Policy

Albert Queralto and Patrick Donnelly Moran

No 1217, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: To what extent can monetary policy impact business innovation and productivity growth? We use a New Keynesian model with endogenous total factor productivity (TFP) to quantify the TFP losses due to the constraints on monetary policy imposed by the zero lower bound (ZLB) and the TFP benefits of tightening monetary policy more slowly than currently anticipated. In the model, monetary policy influences firms incentives to develop and implement innovations. We use evidence on the dynamic effects of R&D and monetary shocks to estimate key parameters and assess model performance. The model suggests significant TFP losses due to the ZLB.

Keywords: Endogenous Technology; Business Cycles; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E32 F41 F44 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ino, nep-mac, nep-mon, nep-opm and nep-sbm
Date: 2017-11-22
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1217

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DOI: 10.17016/IFDP.2017.1217

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