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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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  • Serena Masino, 2012. "Macroeconomic Instability and the Incentive to Innovate," Centre for Growth and Business Cycle Research Discussion Paper Series 167, Economics, The University of Manchester.
    • Handle: RePEc:man:cgbcrp:167
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    File URL: http://hummedia.manchester.ac.uk/schools/soss/cgbcr/discussionpapers/dpcgbcr167.pdf
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