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Macroeconomic instability and the incentive to innovate

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  • Masino, Serena

Abstract

This paper investigates the channels through which macroeconomic volatility prevents or hinders innovative investment undertakings financed by the domestic business sector. The analysis is based on a sample of 48 countries, representing all levels of development, and uses various measures of macroeconomic instability, such as political, real and monetary volatility. The results suggest a negative impact of macroeconomic instability on the share of R&D financed by the domestic business sector. These outcomes highlight the desirability of counter-cyclical policy interventions aiming to prevent the avoidance or abandonment of private R&D undertakings in unstable macroeconomic environments.

Suggested Citation

  • Masino, Serena, 2012. "Macroeconomic instability and the incentive to innovate," MPRA Paper 38830, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:38830
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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