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Can the Mortensen-Pissarides model match the housing market facts?

Lisi, Gaetano (2013): Can the Mortensen-Pissarides model match the housing market facts?

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Abstract

In the housing markets three basic facts have been repeatedly reported by empirical studies: the existence of price dispersion, the positive correlation between housing price and time-on-the-market, and between housing price and trading volume. Since housing markets are characterised by a decentralised framework of exchange with important search and matching frictions, this paper examines whether the baseline search and matching model can account for these three basic facts. We find that the behaviour of the housing market reflected in the above empirical findings can be addressed by the standard matching framework.

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