Cover -- Contents -- I. Introduction -- II. The Model -- A. Households -- B. Producers -- B.1 Final Goods Producers -- B.2 Intermediate Goods Producers -- C. Closing the Model -- C.1 Market Clearing Conditions -- C.2 Monetary Policy Rule -- III. Bayesian Estimation -- A. Data -- B. Priors and Posteriors -- C. Implications of the Model: Posterior Second Moments and Impulse Responses -- C.1 Second Moments -- C.2 Model Simulation -- C.3 Impulse Responses -- IV. Robustness: The Role of Financial Frictions and Labor Market Rigidities -- V. Conclusions -- References -- Figures -- 1. Residential Investment (y-o-y real growth rate) -- 2. House Price Indices (y-o-y percent growth rate) -- 3. 3-Month T-Bill Rates in Spain and in the EMU -- 4. Number of Households and Population. Annual Growth Rates -- 5. Priors (black solid line) and Posteriors (red dashed line) -- 6. Priors (black solid line) and Posteriors (red dashed line) -- 7. Model Simulation with Smoothed Shocks. Percent Contribution of Each Shock to Overall Volatility -- 8. Posterior Impulse Responses (mean and 95% C.I.) to a Technology Shock in the Housing Sector -- 9. Posterior Impulse Responses (mean and 95% C.I.) to a Preference Shock in the Housing Sector -- 10. Posterior Impulse Responses (mean and 95% C.I.) to a Monetary Policy Shock in the Euro Area -- Tables -- 1. Calibrated parameters -- 2a. Prior and Posterior Disributions -- 2b. Prior and Posterior Disributions -- 3a. Second Moments in Spain -- 3b. Second Moments in the rest of EMU -- 4. Variance Decomposition (in percent) -- 5. Model Comparison.