Inflation and economic growth in a Schumpeterian model with endogenous entry of heterogeneous firms

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Title:	Inflation and economic growth in a Schumpeterian model with endogenous entry of heterogeneous firms
Authors:	Chu, AC (Chu, Angus C.) Cozzi, G (Cozzi, Guido) Furukawa, Y (Furukawa, Yuichi) Liao, CH (Liao, Chih-Hsing)
Contributors:	經濟系
Keywords:	Monetary policy Inflation Economic growth Heterogeneous firms
Date:	2017-09
Issue Date:	2018-01-26 10:57:40 (UTC+8)
Abstract:	This study develops a Schurfipeterian growth model with endogenous entry of heterogeneous firms to analyze the effects of monetary policy on economic growth via a cash-in advance constraint on R&D investment. Our results can be summarized as follows. In the special case of a zero entry cost, an increase in the nominal interest rate decreases R&D, the arrival rate of innovations and economic growth as in previous studies. However, in the general case of a positive entry cost, an increase in the nominal interest rate affects the distribution of innovations that are implemented and would have an inverted-U effect on economic growth if the entry cost is sufficiently large. We also calibrate the model to aggregate data of the US economy and find that the growth-maximizing inflation rate is about 3%, which is consistent with recent empirical estimates. Finally, we also explore the welfare effects of inflation and consider a number of extensions to the benchmark model. (C) 2017 Elsevier B.V. All rights reserved.
Relation:	EUROPEAN ECONOMIC REVIEW 卷: 98 頁碼: 392-409
Appears in Collections:	[Department of Economics & Graduate Institute of Economics ] journal articles

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