Growth and wage effects of the monetary policy

We analyse the effects of the monetary policy (inflation) on a set of real macroeconomic variables, via cash‐in‐advance (CIA) constraints and an ‘inflation‐rate’ complexity R&D effect in a knowledge‐driven horizontal R&D growth model with skilled and unskilled labour. The model is calibrated to the U.S. economy. We find that the monetary policy has no effect on firm‐size growth, but a negative impact on economic growth, real interest rate, skill premium, R&D intensity, and welfare; positive influence on the velocity of money. The sign of the theoretical relationships is in line with the dominant empirical evidence.