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Monetary Policy, Innovation Efficiency, And Total Factor Productivity

Author

Listed:
  • Hao-Chang Yang
  • Chun-Ping Chang

    (Shih Chien University)

  • Sahminan

    (Bank Indonesia, indonesia)

  • Arnita Rishanty

    (Bank Indonesia, indonesia)

Abstract

This research explores the impact of monetary policy on the growth rate of total factor productivity (TFPG) and innovation efficiency (IE) through panel data of 30 countries from 1983 to 2018 by the bias-corrected fixed-effect dynamic (BCFE) model. We find that tight monetary policy negatively impacts the growth rate of total factor productivity (TFPG) and innovation efficiency (IE), which is still valid after replacing the independent variables and empirical methods. We then perform sub-sample regressions, and the results show that countries with higher government efficiency, higher financial development, and stricter environmental policy can reduce the negative impact of tightening monetary policy on total factor productivity and innovation efficiency. Our research illustrates that a tightening monetary policy not only adversely impacts total factor productivity, but also influences the main driving force of its growth-innovation efficiency.

Suggested Citation

  • Hao-Chang Yang & Chun-Ping Chang & Sahminan & Arnita Rishanty, 2021. "Monetary Policy, Innovation Efficiency, And Total Factor Productivity," Working Papers WP/15/2021, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp15021
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monetary Policy; Innovation Efficiency; TFP; Government Efficiency bank in emerging markets;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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