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Inflation and Innovation in a Schumpeterian Economy with North–South Technology Transfer

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  • ANGUS C. CHU
  • GUIDO COZZI
  • YUICHI FURUKAWA
  • CHIH‐HSING LIAO

Abstract

This study analyzes how inflation affects innovation and international technology transfer via cash‐in‐advance constraints on R&D. We consider a North–South quality‐ladder model that features innovative Northern R&D and adaptive Southern R&D. We find that higher Southern inflation causes a permanent decrease in technology transfer, a permanent increase in the North–South wage gap, and a temporary decrease in the Northern innovation rate. Higher Northern inflation causes a temporary decrease in the Northern innovation rate, a permanent decrease in the North–South wage gap, and ambiguous effects on technology transfer. Finally, we calibrate the model to China–U.S. data to perform a quantitative analysis.

Suggested Citation

  • Angus C. Chu & Guido Cozzi & Yuichi Furukawa & Chih‐Hsing Liao, 2019. "Inflation and Innovation in a Schumpeterian Economy with North–South Technology Transfer," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(2-3), pages 683-719, March.
    • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:2-3:p:683-719
    DOI: 10.1111/jmcb.12514
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    Cited by:

    1. Yu, Po-yang & Lai, Ching-Chong, 2022. "Endogenous innovation scale and patent policy in a monetary Schumpeterian growth model," MPRA Paper 115016, University Library of Munich, Germany.
    2. Oscar Afonso & Tiago Sequeira, 2023. "The Effect of Inflation on Wage Inequality: A North–South Monetary Model of Endogenous Growth with International Trade," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(1), pages 215-249, February.
    3. Daiki Maeda & Yuki Saito, 2020. "Effects of Monetary Policy in a Model with Cash-in-Advance Constraints on R&D and Capital Accumulation," ISER Discussion Paper 1076r, Institute of Social and Economic Research, Osaka University, revised Jun 2020.
    4. Justin Yifu Lin & Jianjun Miao & Pengfei Wang, 2019. "Convergence, Financial Development, and Policy Analysis," Boston University - Department of Economics - Working Papers Series dp-307, Boston University - Department of Economics.
    5. Angus C. Chu & Guido Cozzi & Haichao Fan & Yuichi Furukawa, 2021. "Inflation, Unemployment, and Economic Growth in a Schumpeterian Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 874-909, July.
    6. Zheng, Zhijie & Huang, Chien-Yu & Yang, Yibai, 2020. "Patent protection, innovation, and technology transfer in a Schumpeterian economy," European Economic Review, Elsevier, vol. 129(C).
    7. Angus C. Chu, 2022. "Inflation, innovation, and growth: A survey," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 863-878, July.
    8. FURUKAWA Yuichi & NIWA Sumiko, 2021. "Deflation and Declining Business Dynamism in a Cash-in-Advance Economy," Discussion papers 21058, Research Institute of Economy, Trade and Industry (RIETI).
    9. Justin Yifu Lin & Jianjun Miao & Pengfei Wang, 2020. "Convergence, financial development, and policy analysis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(3), pages 523-568, April.
    10. Ho, Florence Ut Meng, 2023. "Tariffs and Innovation in a Schumpeterian Economy with North-South Technology Transfer," MPRA Paper 118068, University Library of Munich, Germany.
    11. Daiki Maeda & Yuki Saito, 2020. "Effects of Monetary Policy in a Model with Cash-in-Advance Constraints on R&D and Capital Accumulation," ISER Discussion Paper 1076, Institute of Social and Economic Research, Osaka University.
    12. Afonso, Oscar, 2023. "Fiscal and monetary effects on environmental quality, growth, and welfare," Research in Economics, Elsevier, vol. 77(1), pages 202-219.

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