Economics, Econometrics and Finance
4 years ago

Good news about productivity boosts US economy and home prices!

Federal Reserve Bank of Dallas, Globalization and Monetary Policy Institute Working Papers
Understanding the Effect of Productivity Changes on International Relative Prices: The Role of News Shocks
Deokwoo Nam, Jian Wang

Paper Summary

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When US labor productivity goes up compared to other countries, the US dollar gets stronger. This goes against what standard economic models predict. By adding news about future productivity to a model, researchers found that this news can lead to higher labor productivity and increased demand, causing home prices in the US to rise compared to other countries.