14 Pages Posted: 11 Mar 2012
Date Written: March 8, 2012
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: 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