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Innovation, Finance, and Economic Growth : an agent-based model

Author

Listed:
  • Giorgio Fagiolo

    (LEM - Laboratory of Economics and Management - SSSUP - Scuola Universitaria Superiore Sant'Anna = Sant'Anna School of Advanced Studies [Pisa])

  • Daniele Giachini

    (SSSUP - Scuola Universitaria Superiore Sant'Anna = Sant'Anna School of Advanced Studies [Pisa])

  • Andrea Roventini

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

This paper extends the endogenous-growth agent-based model in Fagiolo and Dosi (2003) to study the financegrowth nexus. We explore industries where firms produce a homogeneous good using existing technologies, perform R&D activities to introduce new techniques, and imitate the most productive practices. Unlike the original model, we assume that both exploration and imitation require resources provided by banks, which pool agent savings and finance new projects via loans. We find that banking activity has a positive impact on growth. However, excessive financialization can hamper growth. In- deed, we find a significant and robust inverted-U shaped relation between financial depth and growth. Overall, our results stress the fundamental (and still poorly understood) role played by innovation in the finance-growth nexu

Suggested Citation

  • Giorgio Fagiolo & Daniele Giachini & Andrea Roventini, 2017. "Innovation, Finance, and Economic Growth : an agent-based model," SciencePo Working papers Main hal-03455400, HAL.
    • Handle: RePEc:hal:spmain:hal-03455400
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03455400
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    More about this item

    Keywords

    Agent based model; Innovation; Exploration vs exploitation; Endogenous Growth; Banking sector; Finance Growth Nexus;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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