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Inflation, Innovation and Growth: A Survey

Chu, Angus C. (2020): Inflation, Innovation and Growth: A Survey.

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Abstract

In this survey, we provide a selective review of the literature on inflation, innovation and economic growth. The relationship between inflation and economic growth is a fundamental question in economics. Most studies in this literature explore this relationship in capital-based growth models. This survey reviews a recent branch of this literature on inflation and innovation-driven growth. Specifically, we develop a canonical monetary Schumpeterian growth model to demonstrate the effects of inflation on innovation and the macroeconomy via different channels. We find that the cash-in-advance constraints on consumption and R&D investment have drastically different implications on the macroeconomic effects of inflation.

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