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Stock market boom and the productivity gains of the 1990s

  • Jermann, Urban J.
  • Quadrini, Vincenzo

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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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 54 (2007)
Issue (Month): 2 (March)
Pages: 413-432

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Handle: RePEc:eee:moneco:v:54:y:2007:i:2:p:413-432
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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