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on Financial Development and Growth |
| By: | Angus C. , Chu; Lei, Ji |
| Abstract: | In this study, we develop a monetary Schumpeterian growth model with endogenous market structure (EMS) to explore the effects of monetary policy on the number of firms, firm size, economic growth and social welfare. EMS leads to richer implications and different results from previous studies in which market structure is exogenous. In the short run, a higher nominal interest rate leads to lower growth rates of innovation, output and consumption and also smaller rm size due to a reduction in labor supply. In the long run, an increase in the nominal interest rate reduces the equilibrium number of firms but has no effect on economic growth and fi rm size because of a scale-invariant property of the model as a result of entry and exit of fi rms. Although monetary policy has no long-run effect on economic growth, an increase in the nominal interest rate permanently reduces the levels of output, consumption and employment. Taking into account transition dynamics, we nd that social welfare is decreasing in the nominal interest rate. Given that a zero nominal interest rate maximizes welfare, Friedman rule is optimal in this economy. |
| Keywords: | monetary policy; economic growth; R&D; endogenous market structure |
| JEL: | O30 O40 E41 |
| Date: | 2012–08–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:41027&r=fdg |
| By: | Bianka Dettmer (Friedrich Schiller University Jena, Chair of Economic Policy) |
| Abstract: | Innovations in information- and telecommunication technology render the proximity requirement between business partners obsolete and make business service outsourcing via cross-border trade more feasible. Although the (service-led) growth prospects have been widely discussed, evidence at the country level is scarce. In this paper, we evaluate the effect of openness to trade commercial- and specialized business services on long-run growth by applying a dynamic panel data approach to account for unobserved country specific effects and endogenous growth determinants. The system GMM estimates validate that a long-run growth effect for countries taking part in the outsourcing process of producer services exists. The growth effect is significantly stronger in a sample of Non-OECD countries and suggests a kind of catching-up process. Evidence from two stage least square indicate that the impact of professional service regulation on long-run growth work rather indirectly through trade flows. |
| Keywords: | international trade, business services, growth, system GMM |
| JEL: | F12 F15 L84 O41 |
| Date: | 2012–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2012-049&r=fdg |