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

Adrian Peralta-Alva () and Sami Alpanda
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Sami Alpanda: University of Minnesota

Macroeconomics from University Library of Munich, Germany

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 neo- classical 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 25% decline in market valuation; accounting for more than half of what is observed in the data.

Keywords: Energy Saving Technological Change; Stock Market Collapse 1974 Tobin's q; Induced innovation (search for similar items in EconPapers)
JEL-codes: O (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004-05-18
New Economics Papers: this item is included in nep-his
Note: Type of Document - pdf; pages: 25
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Citations: View citations in EconPapers (1)

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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 (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0405019

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