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Inflation, Innovation, and Technology Transfer in an Open Economy with Variety Expansion

Author

Listed:
  • Hung-Ju Chen

    (National Taiwan University)

  • Hao Guo

    (Liaoning University)

  • Chien-Yu Huang

    (International University of Japan)

  • Yibai Yang

    (University of Macau)

Abstract

This study explores the cross-country effects of inflation on innovation and technology transfer in a North-South variety-expansion model. We find that higher southern inflation causes a permanent increase in the North-South relative wage ratio, a temporary decrease in the northern innovation rate, and a permanent decrease in technology transfer. Higher northern inflation causes a permanent decrease in the North-South relative wage ratio, a temporary decrease in the northern innovation rate, and a permanent decrease (increase) in technology transfer if the southern population is sufficiently small (large). We calculate the model to the China-US data to justify the model implications.

Suggested Citation

  • Hung-Ju Chen & Hao Guo & Chien-Yu Huang & Yibai Yang, 2026. "Inflation, Innovation, and Technology Transfer in an Open Economy with Variety Expansion," Working Papers EMS_2026_10, Research Institute, International University of Japan.
    • Handle: RePEc:iuj:wpaper:ems_2026_10
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    File URL: https://www2.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2026_10.pdf
    File Function: First version, 2026
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    More about this item

    Keywords

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    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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