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Growth and wage effects of the monetary policy

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  • Óscar Afonso

Abstract

We analyse the effects of the monetary policy (inflation) on a set of real macroeconomic variables, via cash‐in‐advance (CIA) constraints and an ‘inflation‐rate’ complexity R&D effect in a knowledge‐driven horizontal R&D growth model with skilled and unskilled labour. The model is calibrated to the U.S. economy. We find that the monetary policy has no effect on firm‐size growth, but a negative impact on economic growth, real interest rate, skill premium, R&D intensity, and welfare; positive influence on the velocity of money. The sign of the theoretical relationships is in line with the dominant empirical evidence.

Suggested Citation

  • Óscar Afonso, 2022. "Growth and wage effects of the monetary policy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4058-4084, October.
    • Handle: RePEc:wly:ijfiec:v:27:y:2022:i:4:p:4058-4084
    DOI: 10.1002/ijfe.2359
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