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Technology creation and monetary transmission

Author

Listed:
  • Uluc Aysun

    (University of Central Florida, Orlando, FL)

  • Sewon Hur

    (Federal Reserve Bank of Dallas, Dallas, TX)

  • Zeynep Yom

    (Villanova University, Villanova, PA)

Abstract

We build and embed an endogenous growth mechanism into an otherwise standard New Keynesian DSGE model to investigate the transmission of monetary policy. Endogenous growth is determined by the R&D expenditures of monopolistically competitive firms and monetary policy, through its effects on these expenditures, can have supply side effects in addition to its usual demand side effects. After solving the model and estimating it with a Bayesian methodology, we find that R&D activity amplifies the responses to monetary policy shocks. An empirical investigation that uses firm-level COMPUSTAT data provides support for this result. Specifically, we find that monetary policy transmission operates more strongly through R&D intensive firms.

Suggested Citation

  • Uluc Aysun & Sewon Hur & Zeynep Yom, 2025. "Technology creation and monetary transmission," Working Papers 2025-02, University of Central Florida, Department of Economics.
    • Handle: RePEc:cfl:wpaper:2025-02ua
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    More about this item

    Keywords

    R&D; endogenous growth; DSGE; monetary policy; COMPUSTAT.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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