Title: A New Keynesian Model with Endogenous Technological Change
Abstract: In this study, we introduce endogenous technological change based on R&D into the new Keynesian model in which nominal wages are presumed to be sticky. This study examines how money growth affects long-run economic growth. We find that there exists a unique balanced growth path for sufficiently high rates of money growth and the economy exhibits sustained growth based on sustained R&D. Faster money growth results in larger employment and faster economic growth along such a balanced growth path. Furthermore, under some parameter restrictions, no balanced growth path exists for small rates of money growth, and the economy is trapped in the steady state without long-run growth. These results suggest that money growth may be an important factor for long-run economic growth.
Publication Year: 2011
Publication Date: 2011-01-01
Language: en
Type: article
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