Monetary policy and endogenous market structure in a Schumpeterian economy
AbstractIn this note, we develop a monetary Schumpeterian growth model to explore the effects of monetary policy on endogenous market structure, economic growth and social welfare. We find that an increase in the nominal interest rate reduces the equilibrium number of firms. Although long-run economic growth is independent of the nominal interest rate due to a scale-invariant property of the model, a higher nominal interest rate leads to lower growth rates of innovation, output and consumption during the transition path. Taking into account transition dynamics, we find that social welfare is decreasing in the nominal interest rate; therefore, Friedman rule is socially optimal in this economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 40467.
Date of creation: Aug 2012
Date of revision:
monetary policy; economic growth; R&D; endogenous market structure;
Other versions of this item:
- Angus C., Chu & Lei, Ji, 2012. "Monetary policy and endogenous market structure in a schumpeterian economy," MPRA Paper 41027, University Library of Munich, Germany.
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
- NEP-FDG-2012-08-23 (Financial Development & Growth)
- NEP-INO-2012-08-23 (Innovation)
- NEP-MAC-2012-08-23 (Macroeconomics)
- NEP-MON-2012-08-23 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anthony M. Santomero & John J. Seater, 1996.
"Alternative monies and the demand for media of exchange,"
Board of Governors of the Federal Reserve System (U.S.), pages 942-964.
- Santomero, Anthony M & Seater, John J, 1996. "Alternative Monies and the Demand for Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 942-60, November.
- Anthony M. Santomero & John J. Seater, 1995. "Alternative Monies and the Demand for Media of Exchange," Center for Financial Institutions Working Papers 96-08, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Chu, Angus C. & Cozzi, Guido, 2013.
"R&D and Economic Growth in a Cash-in-Advance Economy,"
Economics Working Paper Series
1308, University of St. Gallen, School of Economics and Political Science.
- Angus C. Chu & Guido Cozzi, 2014. "R&D And Economic Growth In A Cash‐In‐Advance Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 507-524, 05.
- Chu, Angus C. & Cozzi, Guido, 2012. "R&D and economic growth in a cash-in-advance economy," MPRA Paper 39778, University Library of Munich, Germany.
- Wang, Ping & Yip, Chong K, 1992.
"Alternative Approaches to Money and Growth,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 24(4), pages 553-62, November.
- Marquis, M.H. & Reffett, K., 1992.
"New Technology Spillovers into the Payment System,"
1992_04_2, Department of Economics, Florida State University.
- Peretto, Pietro F., 2007.
"Corporate taxes, growth and welfare in a Schumpeterian economy,"
Journal of Economic Theory,
Elsevier, vol. 137(1), pages 353-382, November.
- Pietro F. Peretto, 2005. "Corporata Taxes, Growth and Welfare in a Schumpeterian Economy," 2005 Meeting Papers 653, Society for Economic Dynamics.
- Chu, Angus C. & Lai, Ching-Chong & Liao, Chih-Hsing, 2010.
"A tale of two growth engines: The interactive effects of monetary policy and intellectual property rights,"
30105, University Library of Munich, Germany, revised Apr 2011.
- Angus C. Chu & Ching-Chong Lai & Chih-Hsing Liao, 2010. "A Tale of Two Growth Engines: The Interactive Effects of Monetary Policy and Intellectual Property Rights," IEAS Working Paper : academic research 10-A006, Institute of Economics, Academia Sinica, Taipei, Taiwan.
- Federico Etro, 2012. "Endogenous Market Structures and Welfare," Working Papers 2012_12, Department of Economics, University of Venice "Ca' Foscari".
- Max Gillman & Michal Kejak, 2005. "Contrasting Models of the Effect of Inflation on Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 113-136, 02.
- Joonkyung Ha & Peter Howitt, 2007. "Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 733-774, 06.
- Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
- Christopher Laincz & Pietro Peretto, 2006. "Scale effects in endogenous growth theory: an error of aggregation not specification," Journal of Economic Growth, Springer, vol. 11(3), pages 263-288, September.
- Mulligan, Casey B & Sala-I-Martin, Xavier X, 1997.
"The Optimum Quantity of Money: Theory and Evidence,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 29(4), pages 687-715, November.
- Casey B. Mulligan & Xavier X. Sala-i-Martin & Frederic S. Mishkin & Jonas D. M. Fisher, 1997. "The optimum quantity of money: theory and evidence," Proceedings, Federal Reserve Bank of Cleveland, pages 687-724.
- Casey B. Mulligan & Xavier X. Sala-i-Martin, 1997. "The Optimum Quantity of Money: Theory and Evidence," NBER Working Papers 5954, National Bureau of Economic Research, Inc.
- Casey B. Mulligan & Xavier Sala-i-Martin, 1997. "The optimum quantity of money: Theory and evidence," Economics Working Papers 229, Department of Economics and Business, Universitat Pompeu Fabra.
- Stefan Niemann & Michael Evers & Marc Schiffbauer, 2007. "Inflation, Investment Composition and Total Factor Productivity," Economics Discussion Papers 632, University of Essex, Department of Economics.
- Funk Peter & Kromen Bettina, 2010.
"Inflation and Innovation-Driven Growth,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 10(1), pages 1-52, August.
- Peretto, Pietro F., 1995.
"Sunk Costs, Market Structure, and Growth,"
95-34, Duke University, Department of Economics.
- Charles I. Jones, .
"Growth: With or Without Scale Effects?,"
99001, Stanford University, Department of Economics.
- Peretto, Pietro F., 1996.
"Technological Change and Population Growth,"
96-28, Duke University, Department of Economics.
- Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
- Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
- Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
- Chien-Yu Huang & Juin-Jen Chang & Lei Ji, 2013.
"Cash-In-Advance Constraint on R&D in a Schumpeterian Growth Model with an Endogenous Market Structure,"
IEAS Working Paper : academic research
13-A009, Institute of Economics, Academia Sinica, Taipei, Taiwan.
- Chienyu Huang & Juin Jen Chang & Lei Ji, 2013. "Cash in advance constraint on RD in a Schimpeterian growth model with an endogenous market structure," Documents de Travail de l'OFCE 2013-16, Observatoire Francais des Conjonctures Economiques (OFCE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.