Oil Crisis, Energy-Saving Technological Change and the Stock Market Crash of 1973-74

Sami Alpanda and Adrian Peralta-Alva (aperaltaalva@gmail.com)
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Sami Alpanda: Department of Economics, Amherst College

No 604, Working Papers from University of Miami, Department of Economics

Abstract: The market value of U.S. corporations was nearly halved following the oil crisis of October 1973. Real energy prices more than doubled by the end of the decade, increasing energy costs and spurring innovation in energy-saving technologies by corporations. This paper uses a neoclassical growth model to quantify the impact of the increase in energy prices on the market value of U.S. corporations. In the model, corporations adopt energy-saving technologies as a response to the energy price shock and the price of installed capital falls due to investment irreversibility. The model calibrated to match the subsequent decline in energy consumption in the U.S. generates a 24% decline in market valuation; accounting for nearly half of what is observed in the data.

Keywords: Stock market crash; Energy crisis; Energy saving technological change; Induced innovation (search for similar items in EconPapers)
JEL-codes: E2 O3 O4 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2003-11-01, Revised 2006-12
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Forthcoming: Under Review

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https://www.herbert.miami.edu/_assets/files/repec/wp-0604.pdf Revised version, 2006 (application/pdf)

Related works:
Journal Article: Oil Crisis, Energy-Saving Technological Change and the Stock Market Crash of 1973-74 (2010)
Working Paper: Oil crisis, energy-saving technological change and the stock market crash of 1973-74 (2008)
Working Paper: Oil Crisis, Energy-Saving Technological Change and the Stock Market Crash of 1973-74 (2007)
Working Paper: Oil Crisis, Energy-Saving Technological Change and the Stock Market Crash of 1973-74 (2004)
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