"Department of Industrial Engineering and Economics Working Paper 2017-1" is now available

Department of Industrial Engineering and Economics issues the series of Working Paper to highlight our recent research activities.

The latest issue, 2017-1: Takeo Hori, Monetary Policy, Financial Frictions, and Heterogeneous R&D Firms in an Endogenous Growth Model.

Title of original paper

Monetary Policy, Financial Frictions, and Heterogeneous R&D Firms in an Endogenous Growth Model

Author

Takeo Hori

Abstract

Motivated by the empirical facts, we construct an endogenous growth model in which heterogeneous R&D firms are financially constrained and use cash to finance R&D investments. The interaction between financial constraints and heterogeneity is an important determinant of the optimality of the Friedman rule. If there are no financial frictions, the presence of heterogeneity does not affect the optimality of the Friedman rule. If there are severe financial frictions, however, heterogeneity has an important effect. Without heterogeneity, the Friedman rule is optimal. However, with heterogeneity among R&D firms, deviating from the Friedman rule improves social welfare under a plausible condition.

Following issues of Working Paper will appear as soon as available.

• Publications
• Department of Industrial Engineering and Economics Working Paper 2017-1