Housing market spillover: Evidence from an equilibrium search model

We develop and estimate an equilibrium search model of the housing market with aggregate shocks. Our purpose is to quantify the spillover effects between housing market and the wider economy. We investigate two potential mechanisms. First, we aim to understand to what extent individual shocks, acting as the main determinant of mobility, can drive the business cycle. Second, we establish under which conditions aggregate shocks can cause downturn on the housing market. Our model incorporates a realistic housing market (homeowners/renters) and heterogeneous agents (age, family size) who make residential choices in the presence of idiosyncratic and aggregate shocks. We take this model into estimation using a panel of French census data.