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Macroeconomic Policy, Product Market Competition, and Growth
The Intangible Investment Channel

by JaeBin Ahn, Romain A. Duval, and Can Sever

Series:Working Paper No. 20/25
ISBN 9781513528571
Code: #WPIEA2020025

Publication year: 2020

Cdn: $27.00; US: $25.00
Paperback
Language: English
28 pages
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While there is growing evidence of persistent or even permanent output losses from financial crises, the causes remain unclear. One candidate is intangible capital – a rising driver of economic growth that, being non-pledgeable as collateral, is vulnerable to financial frictions. By sheltering intangible investment from financial shocks, counter-cyclical macroeconomic policy could strengthen longer-term growth, particularly so where strong product market competition prevents firms from self-financing their investments through rents. Using a rich cross-country firm-level dataset and exploiting heterogeneity in firm-level exposure to the sharp and unforeseen tightening of credit conditions around September 2008, we find strong support for these theoretical predictions. The quantitative implications are large, highlighting a powerful stabilizing role for macroeconomic policy through the intangible investment channel, and its complementarity with pro-competition product market deregulation.
Macroeconomic Policy, Product Market Competition, and Growth
Cdn: $27.00; US: $25.00
International Monetary Fund (IMF) BookID: 126952 Added: 2020.2.9