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Stock Market Boom and the Productivity Gains of the 1990s

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  • Urban Jermann
  • Vincenzo Quadrini

Abstract

Together with a sense of entering a New Economy, the US experienced in the second half of the 1990s an economic expansion, a stock market boom, a financing boom for new firms and productivity gains. In this paper, we propose an interpretation of these events within a general equilibrium model with financial frictions and decreasing returns to scale in production. We show that the mere prospect of high future productivity growth can generate sizable gains in current productivity, as well as the other above mentioned events.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9034.

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Date of creation: Jun 2002
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Publication status: published as Jermann, U. J. and V. Quadrini. "Stock Market Boom and the Productivity Gains of the 1990s." Journal of Monetary Economics (March 2007): 413-432.
Handle: RePEc:nbr:nberwo:9034

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