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Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 279 Abstract:
Market booms are often followed by dramatic falls. To explain this requires an asymmetry in the underlying shocks. A straightforward model of technological progress generates asymmetries that are also the source of growth cycles. Assuming a representative consumer, we show that the stock market generally rises, punctuated by occasional dramatic falls. With high risk aversion, bad news causes dramatic increases in prices. Bad news does not correspond to a contraction of existing production possibilities, but to a slowdown in their rate of expansion. This economy provides a model of endogenous growth cycles in which recoveries and recessions are dictated by the adoption of innovations.
Parola chiave: Technological Revolutions, Stock Market Value, and Growth Cycles Soggetto: O30 - Innovation; Research and Development; Technological Change; Intellectual Property Rights: General, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, O41 - One, Two, and Multisector Growth Models, and O40 - Economic Growth and Aggregate Productivity: General