Working Paper: NBER ID: w11496
Authors: Paul Beaudry; Franck Portier
Abstract: This paper uses aggregate Japanese data and sectoral U.S. data to explore the properties of the joint behavior of stock prices and total factor productivity (TFP) with the aim of highlighting data patterns that are useful for evaluating business cycle theories. The approach used follows that presented in Beaudry and Portier [2004b]. The main findings are that (i) in both Japan and the U.S., innovations in stock prices that are contemporaneously orthogonal to TFP precede most of the long run movements in total factor productivity and (ii) such stock prices innovations do not affect U.S. sectoral TFPs contemporaneously, but do precede TFP increases in those sectors that are driving U.S. TFP growth, namely durable goods, and among them equipment sectors.
Keywords: Total Factor Productivity; Stock Prices; Business Cycles; Japanese Economy; US Economy
JEL Codes: E3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stock price innovations (G13) | TFP (F16) |
| stock price changes (G12) | future productivity changes (O49) |
| stock price innovations (G13) | sectoral TFP (O49) |
| stock price innovations (G13) | TFP in durable goods and equipment sectors (L68) |
| stock price innovations (G13) | long-run TFP movements (O49) |