Getting at Systemic Risk via an Agent-Based Model of the Housing Market
John Geanakoplos, Robert Axtell, J. Doyne Farmer, Peter Howitt, Benjamin Conlee, Jonathan Goldstein, Matthew Hendrey, Nathan M. Palmer, Chun-Yi Yang
American Economic Review · 2012 · Volume 102 · Issue 3
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
Criteria for Decision-Making under Risk and Uncertainty, Housing Supply and Markets, Computational Techniques, Simulation Modeling, Business Fluctuations, Cycles, Financial Markets and the Macroeconomy, Financial Crises
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