Macroeconomic Policy, Product Market Competition, and Growth: The Intangible Investment Channel

29 Pages Posted: 4 Mar 2020

See all articles by JeaBin Ahn

JeaBin Ahn

Seoul National University

Romain Duval

International Monetary Fund (IMF)

Can Sever


Date Written: February 2020


While there is growing evidence of persistent or even permanent output losses from financial crises, the causes remain unclear. One candidate is intangible capital - a rising driver of economic growth that, being non-pledgeable as collateral, is vulnerable to financial frictions. By sheltering intangible investment from financial shocks, counter-cyclical macroeconomic policy could strengthen longer-term growth, particularly so where strong product market competition prevents firms from self-financing their investments through rents. Using a rich cross-country firm-level dataset and exploiting heterogeneity in firm-level exposure to the sharp and unforeseen tightening of credit conditions around September 2008, we find strong support for these theoretical predictions. The quantitative implications are large, highlighting a powerful stabilizing role for macroeconomic policy through the intangible investment channel, and its complementarity with pro-competition product market deregulation.

Keywords: Financial crises, Supply and demand, Economic theory, Economic growth, Economic policy, Financial frictions, Intangible investment, Competition, Product Market, Monetary policy, Growth, Hysteresis, WP, pre-crisis, counter-cyclical, post-crisis, Aghion, macroeconomic policy

JEL Classification: F13, F14, F21, F43, O43, E01, O4, D4, G21, E52

Suggested Citation

Ahn, JeaBin and Duval, Romain and Sever, Can, Macroeconomic Policy, Product Market Competition, and Growth: The Intangible Investment Channel (February 2020). IMF Working Paper No. 20/25, Available at SSRN:

JeaBin Ahn (Contact Author)

Seoul National University ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

Romain Duval

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Can Sever

Economist ( email )


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