Financial Development, Economic Growth and R&D Cyclical Movement

Ka Wai Terence Fung, Chi Keung Lau

Research output: Contribution to journalArticle

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.
LanguageEnglish
Number of pages12
JournalJournal of Applied Economics and Business Research
Volume3
Issue number3
Publication statusPublished - 2013
Externally publishedYes

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Economic growth
Financial development
Development economics
Endogenous growth model
Subsidies

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abstract = "This paper builds up an endogenous growth model {\`a} 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.",
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Financial Development, Economic Growth and R&D Cyclical Movement. / Fung, Ka Wai Terence; Lau, Chi Keung.

In: Journal of Applied Economics and Business Research , Vol. 3, No. 3, 2013.

Research output: Contribution to journalArticle

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AB - 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.

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