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

No 10-A006, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan

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 effects of monetary policy in the AK model. In other words, the market power of firms has surprisingly opposite implications on the growth and welfare effects of monetary policy under the two growth engines (i.e., innovation versus capital accumulation). Finally, we simulate the transition dynamics of the R&D-based growth model 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)
Pages: 35 pages
Date: 2010-10
New Economics Papers: this item is included in nep-dge, nep-ino, nep-ipr, nep-pr~, nep-mic and nep-mon
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Citations: View citations in EconPapers (14)

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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 (2011)
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