Patent-Based News Shocks

Danilo Cascaldi-Garcia and Marija Vukotic ()

The Review of Economics and Statistics, 2022, vol. 104, issue 1, 51-66

Abstract: What do patents tell us about the economic effects of future technological improvements? We identify aggregate and industry-level patent-based news shocks by exploiting changes in stock market valuations of firms that obtain patent grants. Our shocks resemble diffusion news: they do not affect total factor productivity in the short run but induce a strong permanent effect after five years. We find that patent-based news shocks produce positive co-movement between consumption, output, investment, and hours. They also generate positive responses in inflation and in the federal funds rate, consistent with standard New Keynesian models.

Date: 2022
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Working Paper: Patent-Based News Shocks (2020)
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