Macroeconomic shocks and ripple effects in the Greater Paris Metropolis

Abstract

The goal of this paper is to show whether the Greater Paris housing market is integrated and can be defined globally or whether housing submarkets are present. Therefore, our aim is to understand whether macroeconomic shocks are homogeneous across the metropolis and to check for the presence of ripple effects. For this purpose, we implement a panelvector autoregressive model at the metropolis and submarket levels to capture, through impulse response functions, the consequences of macroeconomic shocks on housing prices. In a second step, we perform a spatial panel-vector autoregressive model to test for the presence of ripple effects and to check for robustness. We find the presence of housing submarkets and hence heterogeneous reactions of house prices to macroeconomic shocks across submarkets. Finally, we notice the presence of ripple effects in some submarkets.