Stock Market Boom and the Productivity Gains of the 1990s

40 Pages Posted: 27 Jun 2002 Last revised: 10 Mar 2022

See all articles by Urban J. Jermann

Urban J. Jermann

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Vincenzo Quadrini

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: June 2002

Abstract

Together with a sense of entering a New Economy, the US experienced in the second half of the 1990s an economic expansion, a stock market boom, a financing boom for new firms and productivity gains. In this paper, we propose an interpretation of these events within a general equilibrium model with financial frictions and decreasing returns to scale in production. We show that the mere prospect of high future productivity growth can generate sizable gains in current productivity, as well as the other above mentioned events.

Suggested Citation

Jermann, Urban J. and Quadrini, Vincenzo, Stock Market Boom and the Productivity Gains of the 1990s (June 2002). NBER Working Paper No. w9034, Available at SSRN: https://ssrn.com/abstract=317619

Urban J. Jermann (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
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National Bureau of Economic Research (NBER)

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Vincenzo Quadrini

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom