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Inflation and Innovation in a Schumpeterian Economy with North–South Technology Transfer

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  • ANGUS C. CHU
  • GUIDO COZZI
  • YUICHI FURUKAWA
  • CHIH‐HSING LIAO

Abstract

This study analyzes how inflation affects innovation and international technology transfer via cash‐in‐advance constraints on R&D. We consider a North–South quality‐ladder model that features innovative Northern R&D and adaptive Southern R&D. We find that higher Southern inflation causes a permanent decrease in technology transfer, a permanent increase in the North–South wage gap, and a temporary decrease in the Northern innovation rate. Higher Northern inflation causes a temporary decrease in the Northern innovation rate, a permanent decrease in the North–South wage gap, and ambiguous effects on technology transfer. Finally, we calibrate the model to China–U.S. data to perform a quantitative analysis.

Suggested Citation

  • Angus C. Chu & Guido Cozzi & Yuichi Furukawa & Chih‐Hsing Liao, 2019. "Inflation and Innovation in a Schumpeterian Economy with North–South Technology Transfer," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(2-3), pages 683-719, March.
  • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:2-3:p:683-719
    DOI: 10.1111/jmcb.12514
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    File URL: https://doi.org/10.1111/jmcb.12514
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    Cited by:

    1. Daiki Maeda & Yuki Saito, 2020. "Effects of Monetary Policy in a Model with Cash-in-Advance Constraints on R&D and Capital Accumulation," ISER Discussion Paper 1076r, Institute of Social and Economic Research, Osaka University, revised Jun 2020.
    2. Justin Yifu Lin & Jianjun Miao & Pengfei Wang, 2019. "Convergence, Financial Development, and Policy Analysis," Boston University - Department of Economics - Working Papers Series dp-307, Boston University - Department of Economics.
    3. Huang, Chien-Yu & Yang, Yibai & Zheng, Zhijie, 2019. "Patent protection, innovation, and technology transfer in a Schumpeterian economy," MPRA Paper 92888, University Library of Munich, Germany.
    4. Justin Yifu Lin & Jianjun Miao & Pengfei Wang, 2020. "Convergence, financial development, and policy analysis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(3), pages 523-568, April.
    5. Chu, Angus C., 2020. "Inflation, Innovation and Growth: A Survey," MPRA Paper 103740, University Library of Munich, Germany.
    6. Daiki Maeda & Yuki Saito, 2020. "Effects of Monetary Policy in a Model with Cash-in-Advance Constraints on R&D and Capital Accumulation," ISER Discussion Paper 1076, Institute of Social and Economic Research, Osaka University.
    7. Zheng, Zhijie & Huang, Chien-Yu & Yang, Yibai, 2020. "Patent protection, innovation, and technology transfer in a Schumpeterian economy," European Economic Review, Elsevier, vol. 129(C).

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