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Working Paper

On the Cyclicality of R&D: Disaggregated Evidence

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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.
06.01.2007ISSN 2573-7953 WP 07-07DOI 10.26509/frbc-wp-200707
Keywords business cycles, economic growth, procyclicality, research and development, r&d
JEL Classification Codes E22, E32

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Ouyang, Min. 2007. “On the Cyclicality of R&D: Disaggregated Evidence .” Federal Reserve Bank of Cleveland, Working Paper No. 07-07. https://doi.org/10.26509/frbc-wp-200707