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Working Paper

On the Cyclicality of R&D: Disaggregated Evidence

This paper explores the link between short-run cycles and long-run growth by examining the cyclical properties of R&D at the disaggregated industry level. The relationship between R&D and output is estimated using an annual panel of 20 U.S. manufacturing industries from 1958 to 1998. The results indicate that R&D is in fact procyclical; but interestingly, estimates using demand-shift instruments suggest that it responds asymmetrically to demand shocks. We discuss the possibilities that liquidity constraints and technology improvement cause the observed procyclicality of R&D.

Suggested Citation

Ouyang, Min. 2007. “On the Cyclicality of R&D: Disaggregated Evidence .” Federal Reserve Bank of Cleveland, Working Paper No. 07-07.