Getting at Systemic Risk Via an Agent-Based Model of the Housing Market

14 Pages Posted: 11 Mar 2012  

John Geanakoplos

Yale University - Cowles Foundation

Robert Axtell

George Mason University - Department of Computational Social Science; George Mason University - Department of Economics; Santa Fe Institute - Economics

J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School; Santa Fe Institute

Peter Howitt

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Benjamin Conlee

affiliation not provided to SSRN

Jonathan Goldstein

affiliation not provided to SSRN

Matthew Hendrey

George Mason University - Department of Computational Social Science

Nathan Palmer

George Mason University - Department of Computational Social Science

Chun-Yi Yang

affiliation not provided to SSRN

Date Written: March 8, 2012

Abstract

Systemic risk must include the housing market, though economists have not generally focused on it. We begin construction of an agent-based model of the housing market with individual data from Washington, DC. Twenty years of success with agent-based models of mortgage prepayments give us hope that such a model could be useful. Preliminary analysis suggests that the housing boom and bust of 1997-2007 was due in large part to changes in leverage rather than interest rates.

Keywords: Agent based models, Housing prices, Boom and bust, Leverage, Interest rates, Foreclosures, Systemic risk

JEL Classification: E3, E31 E32, E37, E44, E63, R2, R20, R21, R23, R28, R3, R30, R31, R38

Suggested Citation

Geanakoplos, John D and Axtell, Robert and Farmer, J. Doyne and Howitt, Peter and Conlee, Benjamin and Goldstein, Jonathan and Hendrey, Matthew and Palmer, Nathan and Yang, Chun-Yi, Getting at Systemic Risk Via an Agent-Based Model of the Housing Market (March 8, 2012). Cowles Foundation Discussion Paper No. 1852. Available at SSRN: https://ssrn.com/abstract=2018375 or http://dx.doi.org/10.2139/ssrn.2018375

John D Geanakoplos (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3397 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://cowles.econ.yale.edu/P/au/d_gean.htm

Robert Axtell

George Mason University - Department of Computational Social Science ( email )

4400 University Drive
375 Research Hall
Fairfax, VA 22030
United States

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

Santa Fe Institute - Economics ( email )

1399 Hyde Park Rd
Santa Fe, NM 87501
United States

J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School ( email )

Eagle House
Walton Well Road
Oxford, OX2 6ED
United Kingdom

HOME PAGE: http://www.inet.ox.ac.uk/people/view/4

Santa Fe Institute ( email )

1399 Hyde Park Road
Santa Fe, NM 87501
United States
505-984-8800 (Phone)
505-982-0565 (Fax)

HOME PAGE: http://www.santafe.edu/~jdf/

Peter Howitt

Brown University - Department of Economics ( email )

Box B
Providence, RI 02912
United States
401-863-2145 (Phone)
401-863-1970 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Benjamin Conlee

affiliation not provided to SSRN ( email )

Jonathan Goldstein

affiliation not provided to SSRN ( email )

Matthew Hendrey

George Mason University - Department of Computational Social Science ( email )

4400 University Drive
Research I, CSC Suite, Level 3
Fairfax, VA 22030
United States

Nathan Palmer

George Mason University - Department of Computational Social Science ( email )

4400 University Drive
Research I, CSC Suite, Level 3
Fairfax, VA 22030
United States

Chun-Yi Yang

affiliation not provided to SSRN ( email )

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