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Inflation, Complexity and Endogenous Growth

Author

Listed:
  • Tiago Neves Sequeira

    (CeBER and Faculty of Economics, University of Coimbra)

  • Pedro Mazeda Gil

    (CEF.UP, Faculty of Economics, University of Porto)

  • Óscar Afonso

    (CEF.UP, Faculty of Economics, University of Porto)

Abstract

In this article, we argue that inflation increases complexity pertaining to knowledge production (or R&D). Then, we expand a recently developed complexity index based on entropy to include the effect of inflation. As a result of this new mechanism in an endogenous growth model, inflation is no longer superneutral. In the model, inflation can decrease economic growth in a nonlinear way, a sudden upward shock on inflation can severely hurt economic growth and an inflation cut can be responsible for a take-off. These effects are illustrated quantitatively.

Suggested Citation

  • Tiago Neves Sequeira & Pedro Mazeda Gil & Óscar Afonso, 2019. "Inflation, Complexity and Endogenous Growth," CeBER Working Papers 2019-04, Centre for Business and Economics Research (CeBER), University of Coimbra.
    • Handle: RePEc:gmf:papers:2019-04
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    Cited by:

    1. 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.
    2. Giovanni Bella & Paolo Mattana & Beatrice Venturi, 2022. "Existence and implications of a pitchfork-Hopf bifurcation in a continuous-time two-sector growth model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(1), pages 259-285, January.

    More about this item

    Keywords

    Inflation; endogenous economic growth; complexity effects; entropy.;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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