Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations

Comín, Diego; Gertler, Mark; Santacreu, Ana María

doi:10.20955/wp.2014.045

Cited by 34 publications

(39 citation statements)

References 12 publications

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“…Methodologically, our paper extends recent work by Comin and Gertler () and Comin, Gertler, and Santacreu (). Building on the seminal work of Romer () and Grossman and Helpman (), these papers integrate innovation and the adoption of new technologies into a real business cycle model and show that the resulting stochastic endogenous growth model features rich movements at a lower‐than‐business‐cycle frequency, which they label medium‐term business cycles.…”

supporting

confidence: 79%

“…Given our definition of stocks as claims to the net payout of all production sectors, in the symmetric equilibrium the aggregate dividend becomes

{MJX-tex-caligraphicscriptD}_{t} = D_{t} + {normalΠ}_{t} N_{t} - S_{t} .

Defining the stock market value to be the discounted sum of future aggregate dividends and exploiting the optimality conditions, this value can be rewritten as

\begin{matrix} true \\ right {MJX-tex-caligraphicscriptQ}_{t} & = & left q_{t} K_{t + 1} + N_{t} (V_{t} - {normalΠ}_{t}) \\ left + E_{t} ([], \sum_{i = 0}^{\infty}, M_{t + i + 1}, (V_{t + i + 1} (N_{t + i + 1} - (1 - ϕ) N_{t + i}) - S_{t + i + 1})), \end{matrix}

similar to Comin, Gertler, and Santacreu (). Thus, the stock market value consists of (i) the current market value of the installed capital stock (first term), (ii) the market value of currently used patents (second term), and (iii) the market value of patents to be developed in the future (third term).…”

Section: Modelmentioning

confidence: 99%

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Innovation, Growth, and Asset Prices

Kung¹,

Schmid

2015

The Journal of Finance

233

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Asset prices reflect anticipations of future growth. We examine the asset pricing implications of a production economy whose long-term growth prospects are endogenously determined by innovation and R&D. In equilibrium, R&D endogenously drives a small, persistent component in productivity which generates long-run uncertainty about economic growth. With recursive preferences, households fear that persistent slowdowns in economic growth are accompanied by low asset valuations and command high risk premia in asset markets. Empirically, we find substantial evidence for innovation-driven low-frequency movements in aggregate growth rates and asset market valuations. In short, equilibrium growth is risky.

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supporting

confidence: 79%

“…Given our definition of stocks as claims to the net payout of all production sectors, in the symmetric equilibrium the aggregate dividend becomes

{MJX-tex-caligraphicscriptD}_{t} = D_{t} + {normalΠ}_{t} N_{t} - S_{t} .

Defining the stock market value to be the discounted sum of future aggregate dividends and exploiting the optimality conditions, this value can be rewritten as

\begin{matrix} true \\ right {MJX-tex-caligraphicscriptQ}_{t} & = & left q_{t} K_{t + 1} + N_{t} (V_{t} - {normalΠ}_{t}) \\ left + E_{t} ([], \sum_{i = 0}^{\infty}, M_{t + i + 1}, (V_{t + i + 1} (N_{t + i + 1} - (1 - ϕ) N_{t + i}) - S_{t + i + 1})), \end{matrix}

Section: Modelmentioning

confidence: 99%

Innovation, Growth, and Asset Prices

Kung¹,

Schmid

2015

The Journal of Finance

233

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“…Finally, we borrow ideas from the unified treatment of business cycles and long‐term dynamics in Comin and Gertler (), Comin, Gertler, and Santacreu (), Gornemann (), Kung and Schmid (), and Ates and Saffie (). Relative to Comin and Gertler's pioneering work, we modify the households' side so that we can discuss financial frictions as well as feedback from the medium‐frequency components to the high‐frequency components.…”

Section: Introductionmentioning

confidence: 99%

Financial frictions, trends, and the great recession

Guerrón‐Quintana¹,

Jinnai

2019

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We study the causes behind the shift in the level of U.S. GDP following the Great Recession. To this end, we propose a model featuring endogenous productivity à la Romer and a financial friction à la Kiyotaki-Moore. Adverse financial disturbances during the recession and the lack of strong tailwinds post-crisis resulted in a severe contraction and the downward shift in the economy's trend. Had financial conditions remained stable during the crisis, the economy would have grown at its average growth rate. From a historical perspective, the Great Recession was unique because of the size and persistence of adverse shocks, and the lackluster performance of favorable shocks since 2010. for valuable discussions and seminar participants at several institutions and conferences for comments. Ryo Jinnai gratefully acknowledges the support by JSPS KAKENHI grants (16K17080, 16H03626, and 17H00985) as well as the Hitotsubashi Institute for Advanced Study (HIAS).1 More formally, the shift in the GDP trend is detected by the flexible estimation of trends with regime shifts recently advanced by Eo and Kim (2012). We thank Yunjong Eo for helping with the estimation using their approach. 2 The forecast is built assuming that the economy will be growing at the average growth rate for the period 2009.Q2-2015.Q1.

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“…sector-specific technologies. Comin, Gertler and Santacreu (2009) develop a model with shocks to the number of new ideas capable of increasing the efficiency of capital and labor. However, resources must be allocated to transform ideas into actual technologies.…”

Section: Introductionmentioning

confidence: 99%

The Analytics of Technology News Shocks

Dupor

Mehkari

2013

SSRN Journal

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This paper constructs several models in which, unlike the standard neoclassical growth model, positive news about future technology generates an increase in current consumption, hours and investment. These models are said to exhibit procyclical news shocks. We find that all models that exhibit procyclical news shocks in our paper have two commonalities. There are mechanisms to ensure that: (I) consumption does not crowd out investment, or vice versa; (II) the benefit of forgoing leisure in response to news shocks outweighs the cost. Among the models we consider, we believe, one model holds the greatest potential for explaining procyclical news shocks. Its critical assumption is that news of the future technology also illuminates the nature of this technology. This illumination in turn permits economic actors to invest in capital that is forward-compatible, i.e. adapted to the new technology. On the technical side, our paper reintroduces the Laplace transform as a tool for studying dynamic economies analytically. Using Laplace transforms we are able to study and prove results about the full dynamics of the model in response to news shocks. * The authors would like to thank 1 To allow for a complete theoretical analysis, we use a continuous time model. A continuous time framework allows us to use the method of Laplace transforms. The Laplace transform is useful for studying linear differential equations with constant coefficients and exogenous (non-homogeneous) terms with discontinuities. 7 Once we log-linearize the growth model, our differential equations take exactly this form. The discontinuity in our model is present because of the forecastable jump in future technology.There are several existing papers on news-driven cycles in dynamic general equilibrium models. Beaudry and Portier (2007) study the difficulty that the neoclassical model has in exhibiting procyclical news shocks. They provide necessary condition on production sets for news shocks to create consumption and investment comovement. Importantly, they observe that many production technologies used in macro do not satisfy this necessary condition. Also, they calibrate a model with one feature capable of generating news-driven cycles: production complementarities of the kind studied in our paper. Their theoretical work does not explore the analytics underlying the dynamics of news-driven cycles. Beaudry and Portier (2004) generate news-driven cycles by modeling final consumption as a function of non-durables and the capital stock. Jaimovich and Rebelo (2009) generate large responses to news shocks, by adding variable capital utilization and two dynamic state variables to the neoclassical model: lagged investment through adjustment costs and time non-separable preferences. Christiano et. al. (2007) use investment adjustment costs and habit persistence to generate news-driven business cycles. Wang (2012) analyzes and compares three existing models generating procyclical news shocks via a labor market diagram. This graphical analysis is very useful for u...

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Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations

Cited by 34 publications

References 12 publications

Innovation, Growth, and Asset Prices

Innovation, Growth, and Asset Prices

Financial frictions, trends, and the great recession

The Analytics of Technology News Shocks

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