International R&D Spillovers and Asset Prices
Abstract: We study the international propagation of long-run risk in the context of a general equilibrium model with endogenous growth. Innovation and international diffusion of technologies are the channels at the core of our mechanism. A calibrated version of the model matches several asset pricing and macroeconomic quantity moments, alleviating some of the puzzles highlighted in the international macro-finance literature. Our model predicts that country-pairs that share more R&D have less volatile exchange rates and more correlated stock market returns. Using data from a sample of 19 developed countries, we provide suggestive empirical evidence in favor of our model?s predictions.
Status: Published in Journal of Financial Economics
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2015-12-02
Note: Forthcoming in Journal of Financial Economics