Endogenous Growth and Real Effects of Monetary Policy: R&D and Physical Capital Complementarities in a Cash-in-Advance Economy

Pedro Gil and Gustavo Iglésias,
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Gustavo Iglésias,: University of Porto, Faculty of Economics

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: We study the real long-run effects of inflation and of the structural stance of monetary policy in the context of a monetary model of R&D-driven endogenous growth complemented with physical capital accumulation. We look into the effects on a set of real macroeconomic variables that have been of interest to policymakers – the economic growth rate, the real interest rate, the physical investment rate, R&D intensity, and the velocity of money –, and which have been analysed from the perspective of different, separated, strands of the theoretical and empirical literature. Additionally, we analyse the theoretical predictions of our model as regards the effects of inflation on the effectiveness of real industrial policy shocks and on the market structure, assessed namely by the average firm size, and present novel cross-country evidence on the empirical relationship between the latter and the long-run inflation rate.

Keywords: Keywords: Endogenous growth; R&D; physical capital; firm size; cash-in-advance; inflation; money. (search for similar items in EconPapers)
JEL-codes: E41 O31 O41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2018-04
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-sbm
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