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Long Term Asset Price Volatility and Macroeconomic Fluctuations


  • Miguel A. Iraola

    (Centro de Investigacion Economica, Instituto Tencologico Autonomo de Mexico)

  • Manuel S. Santos

    () (Department of Economics, University of Miami)


We analyze a stochastic growth model with lags in the operation of new technologies. Stock values are impacted by news on technological innovations and some other external shocks affecting the economy. Episodes of technology adoption may generate long fluctuations in the aggregate value of stocks. We asses the quantitative importance of various macroeconomic variables in accounting for both the observed volatility of stock values and the less pronounced volatility of real macroeconomic aggregates. Our analysis singles out price markups and leverage as key determinants of asset price volatility, and confers a rather limited role to adjustment costs, taxes, and labor and financial frictions.

Suggested Citation

  • Miguel A. Iraola & Manuel S. Santos, 2009. "Long Term Asset Price Volatility and Macroeconomic Fluctuations," Working Papers 2010-1, University of Miami, Department of Economics.
  • Handle: RePEc:mia:wpaper:2010-1

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    References listed on IDEAS

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    Cited by:

    1. Comin, Diego & Mestieri, Martí, 2014. "Technology Diffusion: Measurement, Causes, and Consequences," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 565-622 Elsevier.
    2. Mariano Max Croce, 2010. "Tax Uncertainty, Leverage and Asset Prices," 2010 Meeting Papers 1084, Society for Economic Dynamics.
    3. Ryo Jinnai, 2015. "Innovation, Product Cycle, and Asset Prices," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 484-504, July.
    4. Luigi Bocola & Nils Gornemann, 2013. "Risk, economic growth and the value of U.S. corporations," Working Papers 13-10, Federal Reserve Bank of Philadelphia.
    5. Nicolae B. Gârleanu & Stavros Panageas & Jianfeng Yu, 2009. "Technological Growth and Asset Pricing," NBER Working Papers 15340, National Bureau of Economic Research, Inc.

    More about this item


    Technological innovation; stock market; markups; leverage; taxes; labor and financial frictions.;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates


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