Revisiting The Finance-Innovation Nexus: Evidence from Asia
DOI:
https://doi.org/10.12928/jampe.v4i2.12984Keywords:
Bank Lending, Finance-innovation , Monetary PolicyAbstract
Since a few studies have analysed the long-run impact of monetary
policy, this study aims to contribute to this gap by revisiting the
Schumpeterian finance-innovation nexus and examining the influence of
monetary policy, as well as the mediating function of bank lending, on
technological innovation across Asian economies. This study employs a
fixed-effect model (FEM) to analyse a cross-country dataset of Asian
economies from 2002 to 2023. The finding reveals the direct and
indirect correlation between monetary policy and innovation, as
determined through mediating regression analysis. Furthermore, our
study offers empirical evidence supporting a correlation between
financial development and national innovation. This finding holds across
several primary, robustness, and endogeneity analyses. Furthermore,
this study also found that the direct and indirect effects of monetary
policy on national innovation are more pronounced in upper-middle-
and high-income countries. This study confirms that enhanced bank
lending, facilitated by appropriate monetary policy, has a favourable and
statistically significant impact on national innovation.
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