Financial Systems and Private Innovation Activity. A Research for OECD Countries

ABSTRACT: This research shows the effect that financial markets development has on R&D private investment of OECD countries. The main porpoise of this research is to help policy makers to generate effective policies to spur innovation, especially in underdeveloped countries. Data used on this research comes from World Bank and Unesco for the period 2000-2016. Used methodology is a dynamic panel data in which macroeconomic, financial, innovation and structural variables are included. It was found that stock markets development is positively related with private expenditure on R&D, but bond markets are negatively related with it. Simultaneously, low inflation and stable exchange rates are positively related with R&D. This is a novel research given that we show that an effective innovation policy for private firms, should be accompanied of policies aimed to deepening financial markets as a way to spur investments on R&D.

KEYWORDS: Financial systems, stock markets, credit markets, R&D, innovation