Fung, Ka Wai Terence, Lau, Chi Keung and Chan, Kwok Ho (2016) An R&D-based real business cycle model. International Review of Economics, 63 (4). pp. 327-358. ISSN 1865-1704
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Abstract
The New Keynesian Real Business Cycle model with staggered price adjustment is augmented with an R&D producing sector. Two sources of economic shocks are considered, namely random participation (perturbances to the value of alternative investment opportunities in another sector) and financial intermediation (shocks to the cost of raising capital in the financial intermediation market). We find that, when compared to the baseline model, both models can explain procyclical R&D spending. Additionally, the investment oversensitivity problem is corrected. However, only the financial intermediation model is consistent with the observed finding that the volatility of R&D is larger than those of investment and output.
| Item Type: | Article |
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| Uncontrolled Keywords: | Endogenous growth model, Real business cycle, Asymmetric information, Research and development |
| Subjects: | N100 Business studies N300 Finance |
| Department: | Faculties > Business and Law > Newcastle Business School |
| Depositing User: | Becky Skoyles |
| Date Deposited: | 09 Jun 2016 10:27 |
| Last Modified: | 31 Jul 2021 21:35 |
| URI: | http://nrl.northumbria.ac.uk/id/eprint/27072 |
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