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Stock Prices, News and Economic Fluctuations

In: Enhancing Productivity (NBER-CEPR-TCER-Keio conference)

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  • Paul Beaudry
  • Franck Portier

Abstract

We show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run ? and therefore does not look like a standard technology shock ? but affects productivity with substantial delay ? and therefore does not look like a monetary shock. One structural interpretation for this shock is that it represents news about future technological opportunities which is first captured in stock prices. This shock causes a boom in consumption, investment, and hours worked that precedes productivity growth by a few years, and explains about 50 percent of business cycle fluctuations. (JEL G12, E32, E44)
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Suggested Citation

  • Paul Beaudry & Franck Portier, 2004. "Stock Prices, News and Economic Fluctuations," NBER Chapters, in: Enhancing Productivity (NBER-CEPR-TCER-Keio conference), National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:0185
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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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