Inflation, innovation, and growth: A survey. (27th November 2021)

• Record Type: Journal Article
• Authors: Chu, Angus C.
• Is Part Of: Bulletin of economic research. Volume 74:Number 3(2022)
• Page Start: 863
• Page End: 878
• Publication Date: 2021-11-27
• Subjects: economic growth -- inflation -- innovation; Economics -- Periodicals; Great Britain -- Economic conditions -- Periodicals; 330.05
• DOI: 10.1111/boer.12323
• Languages: English
• ISSNs: 0307-3378

Abstract

Abstract: In this survey, we provide a selective review of the literature on inflation, innovation, and economic growth. The relationship between economic growth and inflation is a fundamental question in economics. Most studies in this literature explore this relationship in capital‐based growth models. This survey reviews a recent branch of this literature on inflation and innovation‐driven growth. Specifically, we use a canonical monetary Schumpeterian growth model to demonstrate the effects of inflation on innovation and the macroeconomy via different channels. We find that the cash‐in‐advance constraints on consumption and R&D investment have drastically different implications on the macroeconomic effects of inflation.