-HOUSE PRICE DYNAMICS IN THE LISBON METROPOLITAN AREA

The Housing market plays a key role in the economy, influencing both financial stability and household wealth. Therefore, studying the dynamics of housing prices is important, particularly in identifying periods of price exuberance and understanding the mechanisms of contagion. This makes the detection of these patterns an important issue, as they provide insights of the shortcomings in the market. This dissertation examines the existence of housing bubbles and contagion across 18 municipalities of the Lisbon Metropolitan Area. Using quarterly real house price data from January 2007 to October 2021, we applied the real-time monitoring procedure developed by Phillips et al. (2015) to identify explosive behavior in house prices. Following this, we employed the time- varying Granger causality framework proposed by Shi et al. (2018) to analyze the exuberance contagion between municipalities. Our findings indicate that all municipalities experienced episodes of exuberance, which persisted until the end of the sample period, except for Lisbon. Additionally, we find evidence of exuberance contagion from Lisbon to the surrounding municipalities, with the exceptions of Oeiras and Sesimbra.