The Real Side of Financial Exuberance: Bubbles, Output and Productivity at the Industry Level

Francisco Queiros

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: There has been a growing interest in the theory of rational bubbles. Recent theories predict that bubbles are expansionary, but differ in the underlying mechanisms. This paper provides empirical evidence that help us assess different theories, and documents four main findings: stock market overvaluation is associated with (i) faster output and input growth, (ii) declining TFP growth, (iii) a greater contribution of labor for output growth, with no change in the contribution of capital, (iv) an increase in the number of firms. Overall, these findings suggest that bubbly expansions are driven by increased factor accumulation (in particular labor), and not from higher productivity growth.

Keywords: Stock prices; fundamentals; bubbles; productivity growth. (search for similar items in EconPapers)
JEL-codes: E44 G12 G31 G32 (search for similar items in EconPapers)
Date: 2021-12-20
New Economics Papers: this item is included in nep-cfn, nep-cwa, nep-eff, nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:632

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