Money, random matching and endogenous growth: A quantitative analysis

Chu, Angus C.; Kan, Kamhon; Lai, Ching Chong; Liao, Chih Hsing

doi:10.1016/j.jedc.2014.02.003

Cited by 8 publications

(7 citation statements)

References 36 publications

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“…10 This formulation of increasing R&D di¢ culty serves to remove a scale e¤ect of human capital 11 in the innovation process as in Segerstrom (1998). 12 Finally, the aggregate arrival rate of innovation is…”

Section: Randdmentioning

confidence: 99%

Human Capital and Innovation in a Monetary Schumpeterian Growth Model

Ning

Zhu

2017

Macroecon. Dynam.

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This study explores the growth and welfare e¤ects of monetary policy in a scaleinvariant Schumpeterian growth model with endogenous human capital accumulation. We model money demand via a cash-in-advance (CIA) constraint on R&D investment. Our results can be summarized as follows. We …nd that an increase in the nominal interest rate leads to a decrease in R&D and human capital investment, which in turn reduces the long-run growth rates of technology and output. This result stands in stark contrast to the case of exogenous human capital accumulation in which the long-run growth rates of technology and output are independent of the nominal interest rate. Simulating the transitional dynamics, we …nd that the additional long-run growth e¤ect under endogenous human capital accumulation ampli…es the welfare e¤ect of monetary policy. Decreasing the nominal interest rate from 10% to 0% leads to a welfare gain that is equivalent to a permanent increase in consumption of 2.82% (2.38%) under endogenous (exogenous) human capital accumulation.JEL classi…cation: O30, O40, E41

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Section: Randdmentioning

confidence: 99%

Human Capital and Innovation in a Monetary Schumpeterian Growth Model

Ning

Zhu

2017

Macroecon. Dynam.

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“…Finally, the overall e¤ect of on the low-growth equilibrium growth rate g low follows a U-shaped function. 10 We summarize these results in Proposition 3.…”

Section: In ‡Ation and Economic Growthmentioning

confidence: 83%

“…where the second equality of (19) makes use of (7) and (10). Using (17) and 19, we can obtain @q b t =@m t = 1=e p t , @d b t =@m t = 1, and @d s t =@k t = e p t (@q s t =@k t ), whereas the other partial derivatives, @q b t =@k t , @d b t =@k t , @q s t =@m t and @d s t =@m t , in (13) and (14) are zero.…”

Section: Individuals' Optimization In the CMmentioning

confidence: 99%

Indeterminacy in a matching model of money with productive government expenditure

Chu

Liao

Liu

et al. 2021

International Review of Economics & Finance

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This study explores the e¤ects of in ‡ation on economic growth in a monetary searchand-matching model with productive government expenditure. Our results can be summarized as follows. When labor intensity in the production function is below a threshold value, the economy features a unique balanced growth equilibrium in which in ‡ation reduces economic growth. When labor intensity in the production function is above a threshold value, the economy may feature multiple balanced growth paths. Multiple equilibria (i.e., global indeterminacy) arise when the matching probability in the decentralized market is su¢ciently large. In this case, the high-growth equilibrium features a negative e¤ect of in ‡ation on economic growth whereas the low-growth equilibrium features a U-shaped e¤ect of in ‡ation on growth. Furthermore, under a su¢ciently large matching probability in the decentralized market, both equilibria are locally determinate, and hence, either equilibrium may emerge in the economy.

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“…where e t is the rate at which the subsequent innovation is invented and S t denotes the value of being employed in an industry in which the subsequent innovation has been invented but not yet been launched to the market. 13 The asset-pricing equation of S t is…”

Section: Asset Valuesmentioning

confidence: 99%

Inflation, Unemployment, and Economic Growth in a Schumpeterian Economy*

Chu

Cozzi

Fan

et al. 2021

Scandinavian J Economics

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This study analyzes the effects of inflation on the long-run nexus between unemployment and economic growth. We introduce money demand via a cash-in-advance (CIA) constraint on R&D investment into a scale-invariant Schumpeterian growth model with matching frictions in the labor market. Given the CIA constraint on R&D, a higher inflation that raises the opportunity cost of cash holdings leads to a decrease in innovation and economic growth, which in turn decreases labor-market tightness and increases unemployment. In summary, the model predicts a positive relationship between inflation and unemployment, a negative relationship between inflation and R&D, and a negative relationship between inflation and economic growth. These theoretical predictions are consistent with recent empirical evidence. Therefore, when inflation is a fundamental variable that affects the economy, unemployment and economic growth exhibit a negative relationship.

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Money, random matching and endogenous growth: A quantitative analysis

Cited by 8 publications

References 36 publications

Human Capital and Innovation in a Monetary Schumpeterian Growth Model

Human Capital and Innovation in a Monetary Schumpeterian Growth Model

Indeterminacy in a matching model of money with productive government expenditure

Inflation, Unemployment, and Economic Growth in a Schumpeterian Economy*

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