Financial Development, Economic Growth and R&D Cyclical Movement

Ka Wai Fung, Chi Keung Lau

    Research output: Contribution to journalArticlepeer-review

    Abstract

    This paper builds up an endogenous growth model à la Aghion and Howitt (1992) and Boucekkine et al (2005). We assume that R&D firms use only investment good as input, instead of final good as hypothesized in the above two models. We show that investment price will be a negative function of aggregate quality index; and thus decline over time. In this model, subsidy on R&D has growth-enhancing effect. Moreover, this model predicts unambiguously that R&D is procyclical.
    Original languageEnglish
    Pages (from-to)133-145
    JournalJournal of Applied Economics and Business Research
    Volume3
    Issue number3
    Publication statusPublished - Nov 2013

    Keywords

    • Endogeneous growth model
    • real business cycle
    • research and development

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