International R&D Spillovers and Asset Prices

47 Pages Posted: 4 Dec 2015  

Federico Gavazzoni

INSEAD

Ana Maria Santacreu

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: 2015-12-02

Abstract

We provide new empirical evidence of a relationship between asset prices and trade-induced international R&D spillovers; in particular, we find that pairs of countries that share more research and development exhibit more highly correlated stock market returns and less volatile exchange rates. We develop an endogenous growth model of innovation and international technology diffusion that accounts for these empirical findings. A calibrated version of the model matches several important asset pricing and quantity moments, which helps explain some of the classical quantity-price puzzles highlighted in the literature on international macroeconomics.

Keywords: Innovation, international diffusion, trade, asset prices, recursive preferences

JEL Classification: F3, F4, O3

Suggested Citation

Gavazzoni, Federico and Santacreu, Ana Maria, International R&D Spillovers and Asset Prices (2015-12-02). FRB St. Louis Working Paper No. 2015-41. Available at SSRN: https://ssrn.com/abstract=2698556

Federico Gavazzoni (Contact Author)

INSEAD ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

HOME PAGE: http://federicogavazzoni.com

Ana Maria Maria Santacreu

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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