Intangible Investment and Low Inflation: A Framework and Some Evidence

September 18, 2020

Preview Citation

Format: Chicago

Subir Lall, and Li Zeng. Intangible Investment and Low Inflation: A Framework and Some Evidence, (USA: International Monetary Fund, 2020) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Intangible investment is growing as a share of economic activity. We present a simple framework incorporating its distinguishing characteristic of generally greater scalability and lower marginal costs than tangible investment. We show evidence that this may have contributed to more elastic aggregate supply in recent years, which is consistent with lower inflation and a flattening of the Phillips curve. This framework also highlights the channels through which technological change, a large constituent of intangible investment, may be leading to wage stagnation and greater market concentration.

Subject: Import prices, Inflation, Inflation targeting, Intangible capital, Labor, Monetary policy, National accounts, Output gap, Prices, Production

Keywords: Aggregate supply supply curve, AS-AD framework, Economy, Global, Import price inflation, Import prices, Inflation, Inflation target, Inflation targeting, Intangible capital, Intangible investment, Investment, Market concentration, Output gap, Returns to scale, Technological change, Unemployment, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/190
Stock No:

WPIEA2020190
ISBN:

9781513557335
ISSN:

1018-5941

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