A tale of two growth engines: The interactive effects of monetary policy and intellectual property rights

Angus Chu, Ching-chong Lai and Chih-Hsing Liao

MPRA Paper from University Library of Munich, Germany

Abstract: How do intellectual property rights that determine the market power of firms influence the effects of monetary policy on economic growth and social welfare? To analyze this question, we develop a monetary R&D-based growth model with elastic labor supply. We find that monetary expansion reduces growth and welfare through a decrease in labor supply that reduces R&D. Furthermore, a larger market power of firms strengthens these effects of monetary policy in the R&D model. In contrast, increasing the market power of firms dampens the growth and welfare effects of monetary policy in the AK model. Therefore, the market power of firms has drastically different implications on the welfare cost of inflation under the two growth engines (i.e., innovation versus capital accumulation). We also calibrate the two models using data in the US and the Euro Area to quantitatively evaluate and compare the welfare cost of inflation in the two economies. Finally, we simulate transition dynamics of the R&D model in order to compute the complete welfare changes from reducing inflation.

Keywords: economic growth; inflation; monetary policy; patent policy; R&D (search for similar items in EconPapers)
JEL-codes: E41 O30 O40 (search for similar items in EconPapers)
Date: 2010-10, Revised 2011-04
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-ino, nep-ipr, nep-pr~, nep-mic and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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https://mpra.ub.uni-muenchen.de/30105/1/MPRA_paper_30105.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/40372/1/MPRA_paper_40372.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/88565/1/MPRA_paper_88565.pdf revised version (application/pdf)

Related works:
Journal Article: A Tale of Two Growth Engines: Interactive Effects of Monetary Policy and Intellectual Property Rights (2019)
Working Paper: A Tale of Two Growth Engines: The Interactive Effects of Monetary Policy and Intellectual Property Rights (2010)
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