Abstract
Executive Summary. This study examines the transmission mechanism of prices and volatility spillovers be-tween the housing markets in Coslada (small city) and Madrid (large city) in Spain. Such analysis provides some insights into the processes house prices follow in small and large cities. A bivariate Generalized Autoregressive Conditionally Heteroskedastic model is utilized. The findings reveal strong evidence of a positive unidi-rectional price spillover from the housing market in Madrid to the housing market in Coslada. However, there are no volatility spillovers between the two markets. Overall, the results support the conventional expectation that prices spill over from the larger cities to the smaller cities.
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