Inflation, endogenous quality increment, and economic growth

Ruiyang Hu, Yibai Yang and Zhijie Zheng

Mathematical Social Sciences, 2021, vol. 114, issue C, 72-86

Abstract: This study explores the effects of monetary policy in a Schumpeterian growth model with endogenous quality increment and distinct cash-in-advance (CIA) constraints on consumption, manufacturing and R&D investment. When the CIA constraint is only on consumption, an increase in the nominal interest rate may stifle economic growth by lowering the arrival rate of innovation and stimulate it at the same time by raising the size of quality increment. An additional CIA constraint on manufacturing weakens the growth-retarding effect and enhances the growth-promoting effect, whereas an additional CIA constraint on R&D strengthens only the negative growth effect. Our quantitative analysis finds that the relation between inflation and growth is generally hump-shaped, but the welfare effect of inflation is negative.

Keywords: Monetary policy; Economic growth; R&D; Endogenous quality increment (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165489621001037
Full text for ScienceDirect subscribers only

Related works:
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:eee:matsoc:v:114:y:2021:i:c:p:72-86

DOI: 10.1016/j.mathsocsci.2021.10.001

Access Statistics for this article

Mathematical Social Sciences is currently edited by J.-F. Laslier

More articles in Mathematical Social Sciences from Elsevier
Bibliographic data for series maintained by Catherine Liu ().