Reserve Bank of Australia | Research Discussion Papers
https://www.rba.gov.au/publications/rdp/index.html
Research Discussion Papers contain the results of economic research within the Reserve Bank. They are issued throughout the year, with summaries periodically reproduced in the Bulletin. The views expressed in them are those of the authors and do not necessarily reflect the views of the Reserve Bank of Australia.2024-02-15T11:30:00+11:00Reserve Bank of AustraliaenDo Monetary Policy and Economic Conditions Impact Innovation? Evidence from Australian Administrative Data
https://www.rba.gov.au/publications/rdp/2024/2024-01.html
Recent papers have argued that monetary policy and economic conditions can influence the amount of innovative activity in the economy, and therefore productivity and living standards in the future. This paper examines whether this is the case for Australia, a small open economy that tends to import innovation from overseas. We find that contractionary (expansionary) monetary policy reduces (increases) aggregate research and development (R&D) spending, and that lower (higher) R&D spending reduces (increases) future productivity. However, using firm-level data and a broader survey measure of innovation that also captures adoption, we find heterogeneous responses across different firm types. Small firms decrease innovation in response to contractionary monetary policy shocks whereas large firms increase innovation. This heterogeneity appears to reflect differing exposure to the channels through which monetary policy affects innovation. These channels include affecting demand or affecting financial conditions and constraints. We also find that US monetary policy spills over and affects Australian firms' innovation. Overall, our results suggest that monetary policy and economic conditions have medium-run effects on productivity, though the effects are more heterogeneous than previously documented. While the effects may cancel out over a cycle, this finding highlights the importance of stabilisation policy in preventing medium-run economic scarring.2024-02-15T11:30:00+11:00Do Monetary Policy and Economic Conditions Impact Innovation? Evidence from Australian Administrative Data2024-02-15innovationmonetary policyfirm-level dataDo Monetary Policy and Economic Conditions Impact Innovation? Evidence from Australian Administrative Datahttps://www.rba.gov.au/publications/rdp/2024/2024-01.htmlPDF versionOmerMajeedOmer MajeedJonathanHamburJonathan HamburRobertBreunigRobert BreunigFebruary 2024Reserve Bank of Australia Research Discussion PapersRDP 2024-01E52O30