We show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run and therefore does not look like a standard technology shock but affects productivity with substantial delay and therefore does not look like a monetary shock. One structural interpretation for this shock is that it represents news about future technological opportunities which is first captured in stock prices. This shock causes a boom in consumption, investment, and hours worked that precedes productivity growth by a few years, and explains about 50 percent of business cycle fluctuations. (JEL G12, E32, E44)
Beaudry, Paul, and Franck Portier.
2006."Stock Prices, News, and Economic Fluctuations."American Economic Review,
96(4): 1293-1307.DOI: 10.1257/aer.96.4.1293