International R&D Spillovers and Asset Prices
Ana Maria Santacreu and
Federico Gavazzoni ()
No 405, 2015 Meeting Papers from Society for Economic Dynamics
We document that international R&D spillovers through trade in varieties is a major driver of asset prices. We find that country pairs that share more R&D have more correlated stock market returns and less volatile exchange rates. Moreover, we show that countries that depend more heavily on their trading partner's R&D have currencies that tend to pay a positive excess return. We develop an endogenous growth model of innovation and international technology diffusion that rationalizes our empirical findings. A calibrated version of our model matches several important asset pricing and quantity moments, thus alleviating several of the classic quantity-price puzzles of the international macroeconomic literature.
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Working Paper: International R&D Spillovers and Asset Prices (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:405
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