Lookup NU author(s): Dr Jong Shin
This is the authors' accepted manuscript of an article that has been published in its final definitive form by Wiley-Blackwell Publishing, Inc., 2018.
For re-use rights please refer to the publisher's terms and conditions.
We introduce borrowing constraints into a two‐sector Schumpeterian growth model and examine the impact of asset price bubbles on innovation. In this environment, rational bubbles arise when the intermediate good producing R&D sector is faced with adverse productivity shocks. Importantly, these bubbles help alleviate credit constraints and facilitate innovation in the stagnant economy. On the policy front, we make a case for debt financed credit to the R&D sector. Further, we establish that a constant credit growth rule (akin to the Friedman rule) outperforms the often prescribed counter‐cyclical “lean against the wind” credit policy.
Author(s): Shin JK, Subramanian C
Publication type: Article
Publication status: Published
Journal: Economic Inquiry
Print publication date: 01/01/2019
Online publication date: 16/07/2018
Acceptance date: 25/04/2018
Date deposited: 21/07/2018
ISSN (print): 0095-2583
ISSN (electronic): 1465-7295
Publisher: Wiley-Blackwell Publishing, Inc.
Altmetrics provided by Altmetric