Long Term Asset Price Volatility and Macroeconomic Fluctuations

Miguel Iraola and Manuel Santos

No 2010-1, Working Papers from University of Miami, Department of Economics

Abstract: 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.

Keywords: Technological innovation; stock market; markups; leverage; taxes; labor and financial frictions. (search for similar items in EconPapers)
JEL-codes: E32 E44 G12 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2009-07-02
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Long-Term Asset Price Volatility and Macroeconomic Fluctuations (2014)
Working Paper: Long-Term Asset Price Volatility and Macroeconomic Fluctuations (2010)
Working Paper: Long-Term Asset Price Volatility and Macroeconomics Fluctations (2009)
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