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International R&D Spillovers and Asset Prices

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We provide new empirical evidence of a relationship between asset prices and trade- Induced international R&D spillovers; in particular, we find that pairs of countries that share more research and development exhibit more highly correlated stock market returns and less volatile exchange rates. We develop an endogenous growth model of innovation and international technology diffusion that accounts for these empirical findings. A calibrated version of the model matches several important asset pricing and quantity moments, which helps explain some of the classical quantity–price puzzles highlighted in the literature on international macroeconomics.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2015-41.

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Length: 47 pages
Date of creation: 02 Dec 2015
Handle: RePEc:fip:fedlwp:2015-041
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  5. Ana Maria Santacreu, 2009. "Innovation, diffusion and trade: theory and measurement," 2009 Meeting Papers 374, Society for Economic Dynamics.
  6. Keller, Wolfgang, 1998. "Are international R&D spillovers trade-related?: Analyzing spillovers among randomly matched trade partners," European Economic Review, Elsevier, vol. 42(8), pages 1469-1481, September.
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  10. Rabitsch, Katrin & Stepanchuk, Serhiy & Tsyrennikov, Viktor, 2015. "International portfolios: A comparison of solution methods," Journal of International Economics, Elsevier, vol. 97(2), pages 404-422.
  11. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
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  14. Riccardo Colacito & Mariano M. Croce, 2011. "Risks for the Long Run and the Real Exchange Rate," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 153-181.
  15. Wei Liao & Ana Maria Santacreu, 2012. "The Trade Comovement Puzzle and the Margins of International Trade," Working Papers 042012, Hong Kong Institute for Monetary Research.
  16. Luboš Pástor & Pietro Veronesi, 2009. "Technological Revolutions and Stock Prices," American Economic Review, American Economic Association, vol. 99(4), pages 1451-1483, September.
  17. Natalia Ramondo, 2009. "Foreign Plants and Industry Productivity: Evidence from Chile," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 789-809, December.
  18. Nicolae Gârleanu & Stavros Panageas & Jianfeng Yu, 2012. "Technological Growth and Asset Pricing," Journal of Finance, American Finance Association, vol. 67(4), pages 1265-1292, 08.
  19. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-969, July.
  20. Bøler, Esther Ann & Moxnes, Andreas & Ulltveit-Moe, Karen-Helene, 2012. "Technological Change, Trade in Intermediates and the Joint Impact on Productivity," CEPR Discussion Papers 8884, C.E.P.R. Discussion Papers.
  21. Santacreu, Ana Maria, 2015. "Innovation, diffusion, and trade: Theory and measurement," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 1-20.
  22. Steven Ho & Philip Howard & Mariano Croce & Riccardo Colacito, 2013. "BKK the EZ way. An International Production Economy with Recursive Preferences," 2013 Meeting Papers 112, Society for Economic Dynamics.
  23. Nishioka, Shuichiro & Ripoll, Marla, 2012. "Productivity, trade and the R&D content of intermediate inputs," European Economic Review, Elsevier, vol. 56(8), pages 1573-1592.
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