R&D Investment and Endogenous Growth: A SVAR Approach

37 Pages Posted: 28 Oct 2009

Date Written: October 27, 2009

Abstract

We develop the barebones of a highly stylized theoretical endogenous growth model for analyzing the impact of R&D investment on long run growth. We use this framework to identify a structural vector autoregressive (SVAR) model on GDP growth, inflation and R&D investment, along with the (exogenous) flows of global knowledge, for the period 1970-2006 for the six more developed economies plus Spain. Besides, we also study the impact of private and public R&D on economic activity and prices or whether public R&D investment crowds out private one. Overall, we find that R&D shocks have a positive impact on economic activity, but a heterogeneous effect on prices. Moreover, public R&D disturbances tend to crowd out private R&D investment, except in the less innovative economies. And finally, demand shocks tend to have a negative impact on private R&D spending in the short- to medium-run.

Keywords: R&D, Innovation, Endogenous growth, Crowding out, SVAR

JEL Classification: O30, O40, H50

Suggested Citation

Estrada, Ángel and Montero, Jose Manuel, R&D Investment and Endogenous Growth: A SVAR Approach (October 27, 2009). Banco de Espana Working Paper No. 0925, Available at SSRN: https://ssrn.com/abstract=1494899 or http://dx.doi.org/10.2139/ssrn.1494899

Ángel Estrada (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

HOME PAGE: http://www.bde.es/

Jose Manuel Montero

Banco de España ( email )

Madrid 28014
Spain

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