Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
Innovation, Productivity, and Monetary Policy
To what extent can monetary policy impact business innovation and productivity growth? We use a New Keynesian model with endogenous total factor productivity (TFP) to quantify the TFP losses due to the constraints on monetary policy imposed by the zero lower bound (ZLB) and the TFP benefits of tightening monetary policy more slowly than currently anticipated. In the model, monetary policy influences firms incentives to develop and implement innovations. We use evidence on the dynamic effects of R&D and monetary shocks to estimate key parameters and assess model performance. The model suggests significant TFP losses due to the ZLB.
Cite this item
Albert Queralto & Patrick Donnelly Moran, Innovation, Productivity, and Monetary Policy, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1217, 22 Nov 2017.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
Keywords: Endogenous Technology ; Business Cycles ; Monetary Policy
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