Real estate prices have a big impact on the economy. When house prices go up, people feel wealthier and spend more money, boosting the economy. This leads to higher output and inflation, causing the central bank to raise interest rates. The study found that changes in house prices can explain a significant portion of fluctuations in output, prices, and interest rates in many countries. In fact, around 12 to 24 percent of house price changes can be linked to interest rate shocks. This shows that the housing market plays a crucial role in shaping the overall economy.