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Macroeconomic Instability and the Incentive to Innovate

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  • Serena Masino

Abstract

This paper investigates the channels through which macroeconomic and institutional instability prevents or hinders innovative investment undertakings financed by the domestic private sector. The analysis is based on a sample of 44 countries representing all levels of development and considers a number of instability dimensions. The results suggest a negative impact of real, monetary and political instability on the aggregate level of national R&D financed by the business sector. Thus, they highlight the desirability of stable macro-institutional environments in preventing avoidance or abandonment of private innovation undertakings.

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File URL: http://www.socialsciences.manchester.ac.uk/cgbcr/dpcgbcr/dpcgbcr167.pdf
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Bibliographic Info

Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 167.

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Length: 32 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:man:cgbcrp:167

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  1. Dotsey, Michael & Sarte, Pierre Daniel, 2000. "Inflation uncertainty and growth in a cash-in-advance economy," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 631-655, June.
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  6. Augstin Kwasi Fosu, 2003. "Political Instability and Export Performance in Sub-Saharan Africa," The Journal of Development Studies, Taylor and Francis Journals, vol. 39(4), pages 68-83.
  7. Matthew Rafferty, 2003. "Do Business Cycles Influence Long-Run Growth? The Effect of Aggregate Demand on Firm-Financed R&D Expenditures," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 607-618, Fall.
  8. Goel, Rajeev K & Ram, Rati, 1999. "Variations in the Effect of Uncertainty on Different Types of Investment: An Empirical Investigation," Australian Economic Papers, Wiley Blackwell, vol. 38(4), pages 481-92, December.
  9. Geroski, P A & Walters, C F, 1995. "Innovative Activity over the Business Cycle," Economic Journal, Royal Economic Society, vol. 105(431), pages 916-28, July.
  10. Matthew Rafferty & Mark Funk, 2008. "Asymmetric Effects Of The Business Cycle On Firm-Financed R&D," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 17(5), pages 497-510.
  11. Ahmed Mushfiq Mobarak, 2005. "Democracy, Volatility, and Economic Development," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 348-361, May.
  12. Kyriakos C. Neanidis & Christos S. Savva, 2010. "Macroeconomic Uncertainty, Inflation and Growth: Regime-Dependent Effects in the G7," Centre for Growth and Business Cycle Research Discussion Paper Series 145, Economics, The Univeristy of Manchester.
  13. Gadi Barlevy, 2004. "On the Timing of Innovation in Stochastic Schumpeterian Growth Models," NBER Working Papers 10741, National Bureau of Economic Research, Inc.
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