This study analyzes how inflation affects innovation and international technology transfer via cash-in-advance constraints on R&D. We consider a North–South quality-ladder model that features innovative Northern R&D and adaptive Southern R&D. We find that higher Southern inflation causes a permanent decrease in technology transfer, a permanent increase in the North–South wage gap, and a temporary decrease in the Northern innovation rate. Higher Northern inflation causes a temporary decrease in the Northern innovation rate, a permanent decrease in the North–South wage gap, and ambiguous effects on technology transfer. Finally, we calibrate the model to China–U.S. data to perform a quantitative analysis.
|頁（從 - 到）||683-719|
|期刊||Journal of Money, Credit and Banking|
|出版狀態||已出版 - 1 3月 2019|