Getting at Systemic Risk via an Agent-Based Model of the Housing Market
J. Doyne Farmer,
Nathan M. Palmer, and
Chun-Yi Yang. 2012. "Getting at Systemic Risk via an Agent-Based Model of the Housing Market."
American Economic Review,
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.
Article Full-Text Access
Geanakoplos, John (Yale University and Santa Fe Institute)
Axtell, Robert (George Mason University)
Farmer, J. Doyne (Santa Fe Institute)
Howitt, Peter (Brown University)
Palmer, Nathan M.
D81: Criteria for Decision-Making under Risk and Uncertainty
R31: Housing Supply and Markets
C63: Computational Techniques; Simulation Modeling
E32: Business Fluctuations; Cycles
E44: Financial Markets and the Macroeconomy
G01: Financial Crises