Macroeconomic shocks and ripple effects in the Greater Paris Metropolis

The aim of this study is to show whether the Greater Paris housing market is integrated and can be defined globally or whether housing submarkets are present. Therefore, we analyze if macroeconomic shocks are homogeneous across the metropolis and check for the presence of ripple effects. For this purpose, we implement a panel vector 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 all submarkets with different spatial effects at play.