We provide new empirical evidence of a relationship between asset prices and tradeinduced international R&D spillovers; in particular, we find that pairs of countries that share more research and development exhibit more highly correlated stock market returns and less volatile exchange rates. We develop an endogenous growth model of innovation and international technology diffusion that accounts for these empirical findings. A calibrated version of the model matches several important asset

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... ng and quantity moments, which helps explain some of the classical quantity-price puzzles highlighted in the literature on international macroeconomics.