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Macroeconomic Volatility, Institutional Instability and the Incentive to Innovate
Author(s) -
Masino Serena
Publication year - 2015
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12127
Subject(s) - economics , volatility (finance) , political instability , incentive , monetary economics , abandonment (legal) , private sector , investment (military) , instability , business cycle , politics , macroeconomics , market economy , finance , economic growth , physics , mechanics , law , political science
Abstract This study investigates the channels through which macroeconomic and institutional instability hinders innovative investment undertakings financed by the domestic private sector. The analysis is based on a sample of 44 countries and considers various instability dimensions. The results suggest a negative impact of real, monetary and political instability on the aggregate level of R&D financed by the business sector. Thus, highlighting the importance of stable macro‐institutional environments in preventing avoidance or abandonment of private innovation undertakings.