Stock Prices, Total Factor Productivity and Economic Fluctuations Some Further Evidence from Japanese and U.S. Sectoral Data

Here we supplement some earlier work (Beaudry and Portier [2004]) with some new evidence obtained from Japanese and U.S. sectoral data. Our results show that (i) In the U.S. as well as for Japan, Stock Prices short run movements incorporate most (all) of the long run shocks to Total Factor Productivity and (ii) the Stock Price news is indeed a shock that does not affect sectoral TFP s on impact, but that increases TFP in the long run in the sectors that are driving TFP growth, namely durable goods, and among them equipment sectors.