Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.
Working Paper: House Prices, Increasing Returns, and the Effects of Government Spending Shocks
We report new regional evidence indicating that U.S. house prices increase after positive shocks to fiscal spending. In sharp contrast to this, house prices fall in conventional DSGE models. We construct a model featuring endogenous firm entry and taste for variety, which can generate a positive response of house prices to fiscal spending.