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Stock market boom and the productivity gains of the 1990s

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  • Jermann, Urban J.
  • Quadrini, Vincenzo

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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Suggested Citation

  • Jermann, Urban J. & Quadrini, Vincenzo, 2007. "Stock market boom and the productivity gains of the 1990s," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 413-432, March.
  • Handle: RePEc:eee:moneco:v:54:y:2007:i:2:p:413-432
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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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