Intangible Investment and Low Inflation: A Framework and Some Evidence

Author/Editor:

Subir Lall ; Li Zeng

Publication Date:

September 18, 2020

Electronic Access:

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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.

Series:

Working Paper No. 20/190

Frequency:

regular

English

Publication Date:

September 18, 2020

ISBN/ISSN:

9781513557335/1018-5941

Stock No:

WPIEA2020190

Format:

Paper

Pages:

26

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