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.
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