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Inflation and Innovation-Driven Growth

Author

Listed:
  • Funk Peter

    (University of Cologne)

  • Kromen Bettina

    (University of Cologne and European Commission)

Abstract

This paper analyzes the interaction between inflation and the long-run levels of employment and output growth in a Schumpeterian growth model with quality improving innovations under nominal price rigidity. At the unique REE steady state equilibrium, both employment and growth are hump-shaped functions of money growth peaking at positive inflation rates.

Suggested Citation

  • 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.
    • Handle: RePEc:bpj:bejmac:v:10:y:2010:i:1:n:23
    DOI: 10.2202/1935-1690.1792
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    More about this item

    Keywords

    inflation; price rigidity; endogenous growth; employment;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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