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International R&D Spillovers and Asset Prices

Federico Gavazzoni () and Ana Maria Santacreu

No 2015-41, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We study the international propagation of long-run risk in the context of a general equilibrium model with endogenous growth. Innovation and international diffusion of technologies are the channels at the core of our mechanism. A calibrated version of the model matches several asset pricing and macroeconomic quantity moments, alleviating some of the puzzles highlighted in the international macro-finance literature. Our model predicts that country-pairs that share more R&D have less volatile exchange rates and more correlated stock market returns. Using data from a sample of 19 developed countries, we provide suggestive empirical evidence in favor of our model?s predictions.

Keywords: international asset pricing; recursive preferences; long-run risk; innovation; international diffusion (search for similar items in EconPapers)
JEL-codes: F3 F4 O3 (search for similar items in EconPapers)
Date: 2015-12-02
New Economics Papers: this item is included in nep-cse, nep-ino and nep-tid
Note: Forthcoming in Journal of Financial Economics
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Published in Journal of Financial Economics

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DOI: 10.20955/wp.2015.041

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