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Macroeconomic instability and the incentive to innovate

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  • Masino, Serena
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    Abstract

    This paper investigates the channels through which macroeconomic volatility prevents or hinders innovative investment undertakings financed by the domestic business sector. The analysis is based on a sample of 48 countries, representing all levels of development, and uses various measures of macroeconomic instability, such as political, real and monetary volatility. The results suggest a negative impact of macroeconomic instability on the share of R&D financed by the domestic business sector. These outcomes highlight the desirability of counter-cyclical policy interventions aiming to prevent the avoidance or abandonment of private R&D undertakings in unstable macroeconomic environments.

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    File URL: http://mpra.ub.uni-muenchen.de/38830/
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    File URL: http://mpra.ub.uni-muenchen.de/41000/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38830.

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    Date of creation: Apr 2012
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    Handle: RePEc:pra:mprapa:38830

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    Keywords: Macroeconomic Volatility; Political Instability; R&D Investment; Innovation;

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    19. Blackburn, Keith, 1999. "Can Stabilisation Policy Reduce Long-Run Growth?," Economic Journal, Royal Economic Society, vol. 109(452), pages 67-77, January.
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    21. Matthew Rafferty & Mark Funk, 2008. "Asymmetric Effects Of The Business Cycle On Firm-Financed R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 17(5), pages 497-510.
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