Rising prices and you can Progress: A low-Monotonic Relationship inside the a technology-Driven Discount

Rising prices and you can Progress: A low-Monotonic Relationship inside the a technology-Driven Discount

That it papers talks about the consequences of economic rules on long-focus on monetary increases thru additional bucks-in-progress limitations toward RD inside a Schumpeterian growth model that have straight and lateral development. The new model is also generate a mixed (monotonic otherwise non-monotonic) dating anywhere between rising prices and you can growth, while the the fresh cousin stamina out-of economic consequences with the increases between other CIA limits and this off RD-labor-reallocation consequences between different diminishing productivity vary to the affordable attract speed. Regarding empirically relevant circumstances where horizontal RD suffers from deeper shrinking efficiency than simply vertical RD, inflation and progress is showcase an upside-down-You relationships when the CIA constraint for the lateral RD try good enough larger than you to towards vertical RD. Eventually, the new model try calibrated on the Us savings, and we also discover the organization-enhancing price out-of rising cost of living is approximately 2.8%, that’s directly consistent with previous empirical prices.

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The connection ranging from inflation and you can growth is actually contingent with the relative extents regarding CIA limits and you will diminishing productivity to 2 kinds of invention

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