CFDP 1852

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

Publication Date: March 2012

Pages: 13

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

See CFP: 1358