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Do Business Cycles Influence Long-Run Growth? The Effect of Aggregate Demand on Firm-Financed R&D Expenditures

  • Matthew Rafferty

    ()

    (School of Business, Quinnipiac University)

This paper finds that inventive activity, as measured by firm-financed R&D expenditures, is procyclical. In addition, the "lost" R&D during recessions is larger than the "extra" R&D during expansions so the overall effect of the business cycle is to reduce firm-financed R&D during the 1957 5o 1999 period. The results suggest that a business cycle activity might influence the long-run growth rate of an economy by reducing firm-financed R&D and productivity growth.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume29/V29N4P607_618.pdf
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Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 29 (2003)
Issue (Month): 4 (Fall)
Pages: 607-618

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Handle: RePEc:eej:eeconj:v:29:y:2003:i:4:p:607-618
Contact details of provider: Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
Web page: http://www.ramapo.edu/eea/journal.htmlEmail:


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  1. Pindyck, Robert S., 1990. "Irreversibility, uncertainty, and investment," Working papers 3137-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  3. Bronwyn H. Hall, 1992. "Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?," NBER Working Papers 4096, National Bureau of Economic Research, Inc.
  4. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1988. "Rates Of Return On Physical And R&D Capital And Structure Of The Production Process: Cross Section And Time Series Evidence," NBER Working Papers 2570, National Bureau of Economic Research, Inc.
  5. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  6. Saint-Paul, Gilles, 1992. "Productivity Growth and the Structure of the Business Cycle," CEPR Discussion Papers 709, C.E.P.R. Discussion Papers.
  7. Bean, C., 1989. "Endogenous Growth And The Procyclical Behaviour Of Productivity," Papers 369, London School of Economics - Centre for Labour Economics.
  8. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier.
  9. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  10. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 783-832.
  11. Blackburn, Keith, 1999. "Can Stabilisation Policy Reduce Long-Run Growth?," Economic Journal, Royal Economic Society, vol. 109(452), pages 67-77, January.
  12. Gali, J. & Hammour, J.L., 1992. "Long Run Effects of Business Cycles," Papers 92-26, Columbia - Graduate School of Business.
  13. 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.
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