A Tale of Two Growth Engines: Interactive Effects of Monetary Policy and Intellectual Property Rights

Chu, Angus C. and Lai, Ching-Chong and Liao, Chih-Hsing (2010): A Tale of Two Growth Engines: Interactive Effects of Monetary Policy and Intellectual Property Rights. Forthcoming in: Journal of Money, Credit and Banking

Abstract

How do intellectual property rights that determine the market power of firms influence the effects of monetary policy? In a hybrid endogenous growth model in which R&D and capital accumulation are both engines of long-run economic growth, we find that monetary expansion hurts economic growth and social welfare by reducing R&D and capital accumulation. Furthermore, a larger market power of firms strengthens (weakens) these effects through the R&D (capital-accumulation) channel. Finally, we calibrate the model using data in the US and Euro Area to simulate the welfare cost of inflation and find that the R&D channel dominates in both economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic growth; R&D; inflation; monetary policy; patent policy
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money

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