Patent-Based News Shocks

47 Pages Posted: 15 Jun 2020

See all articles by Danilo Cascaldi-Garcia

Danilo Cascaldi-Garcia

Board of Governors of the Federal Reserve System

Marija Vukotic

University of Warwick

Date Written: April, 2020


We exploit firm-level data on patent grants and subsequent reactions of stocks to identify technological news shocks. Changes in stock market valuations due to announcements of individual patent grants represent expected future increases in the technology level, which we refer to as patent-based news shocks. Our patentbased news shocks resemble diffusion news, in that they do not affect total factor productivity in the short run but induce a strong permanent effect after five years. These shocks produce positive comovement between consumption, output, investment, and hours. Unlike the existing empirical evidence, patent-based news shocks generate a positive response in inflation and the federal funds rate, in line with a standard New Keynesian model. Patenting activity in electronic and electrical equipment industries, within the manufacturing sector, and computer programming and data processing services, within the services sector, play crucial roles in driving our results.

JEL Classification: E30, E32, L60

Suggested Citation

Cascaldi-Garcia, Danilo and Vukotic, Marija, Patent-Based News Shocks (April, 2020). FRB International Finance Discussion Paper No. 1277, Available at SSRN: or

Danilo Cascaldi-Garcia (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Marija Vukotic

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

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