Innovation, Finance, and Economic Growth: An Agent-Based Approach

Giorgio Fagiolo (), Daniele Giachini and Andrea Roventini

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: This paper extends the endogenous-growth agent-based model in Fagiolo and Dosi (2003) to study the finance-growth nexus. We explore industries where firms produce a homogeneous good using existing technologies, perform R&D activities to introduce new techniques, and imitate the most productive practices. Unlike the original model, we assume that both exploration and imitation require resources provided by banks, which pool agent savings and finance new projects via loans. We find that banking activity has a positive impact on growth. However, excessive financialization can hamper growth. Indeed, we find a significant and robust inverted-U shaped relation between financial depth and growth. Overall, our results stress the fundamental (and still poorly understood) role played by innovation in the finance-growth nexus.

Keywords: Agent-based Models; Innovation; Exploration vs. Exploitation; Endogenous Growth; Banking Sector; Finance-Growth Nexus (search for similar items in EconPapers)
Date: 2017-11-24
New Economics Papers: this item is included in nep-cmp, nep-fdg, nep-gro, nep-hme, nep-ino and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.lem.sssup.it/WPLem/files/2017-30.pdf (application/pdf)

Related works:
Journal Article: Innovation, finance, and economic growth: an agent-based approach (2020)
Working Paper: Innovation, Finance, and Economic Growth: an agent based approach (2017)
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:ssa:lemwps:2017/30

Access Statistics for this paper

More papers in LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy Contact information at EDIRC.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).