Recent evidence suggests that output, consumption, investment and hours rise in response to improvements in the technology for producing consumption goods, but all decline on impact when there is a similar improvement in investment-goods technology. We show that these effects are consistent with...

We argue that positive co-movements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the co-movements by incorporating two key features into a DSGE model: We...