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Technology creation and monetary transmission

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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 supports 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," Villanova School of Business Department of Economics and Statistics Working Paper Series 61, Villanova School of Business Department of Economics and Statistics.
    • Handle: RePEc:vil:papers:61
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    File URL: http://repec.library.villanova.edu/workingpapers/VSBEcon61.pdf
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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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