R&D and Aggregate Fluctuations
The research and development (R&D) sector is considered one of the main driving forces of sustainable growth in the long run. The sector, however, also shows excessive volatility which raises interesting questions regarding the sources of this...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/03/16208631/rd-aggregate-fluctuations http://hdl.handle.net/10986/19864 |
| Summary: | The research and development (R&D)
sector is considered one of the main driving forces of
sustainable growth in the long run. The sector, however,
also shows excessive volatility which raises interesting
questions regarding the sources of this volatility as well
as the nature of the relation between the sector and
aggregate fluctuations. Using data from the United States
Bureau of Economic Analysis and National Science Foundation,
we show that technology innovations are the main source of
fluctuations in R&D investment while R&D technology
shocks are important in driving aggregate output
fluctuations. After taking nominal innovations into
consideration, such as shocks in monetary policy and
inflation, capital investment-specific shocks explain 70
percent of fluctuations of R&D investment, while R&D
technology shocks explain 30 percent of the variation in the
output of the non-R&D sector. Technology innovations
jointly explain most of the variation of output in the
R&D sector and 78 percent of the variation of output in
the rest of the economy. |
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