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 L. Axtell

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

J. Doyne Farmer

Institute for New Economic Thinking; 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 M. 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 and Axtell, Robert L. and Farmer, J. Doyne and Howitt, Peter and Conlee, Benjamin and Goldstein, Jonathan and Hendrey, Matthew and Palmer, Nathan M. 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 L. 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

Institute for New Economic Thinking ( 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 M. 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 )

Paper statistics

Downloads
836
Rank
22,123
Abstract Views
4,276