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

  • John Geanakoplos

    ()

    (Cowles Foundation, Yale University)

  • Robert Axtell

    (George Mason University)

  • Doyne J. Farmer

    (Santa Fe Institute)

  • Peter Howitt

    (Brown University)

  • Benjamin Conlee

    (Ellington Management Group)

  • Jonathan Goldstein

    (George Mason University)

  • Matthew Hendrey

    (George Mason University)

  • Nathan M. Palmer

    (George Mason University)

  • Chun-Yi Yang

    (George Mason University)

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.

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File URL: http://cowles.econ.yale.edu/P/cd/d18b/d1852.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1852.

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Length: 13 pages
Date of creation: Mar 2012
Date of revision:
Publication status: Published in American Economic Review: Papers and Proceedings (May 2012), 102(3): 53-58
Handle: RePEc:cwl:cwldpp:1852
Note: CFP 1358
Contact details of provider: Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/

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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  1. Duca, John V & Muellbauer, John & Murphy, Anthony, 2011. "Shifting Credit Standards and the Boom and Bust in US House Prices," CEPR Discussion Papers 8361, C.E.P.R. Discussion Papers.
  2. John Geanakoplos, 2010. "The Leverage Cycle," NBER Chapters, in: NBER Macroeconomics Annual 2009, Volume 24, pages 1-65 National Bureau of Economic Research, Inc.
  3. Andrew Haughwout & Donghoon Lee & Joseph Tracy & Wilbert van der Klaauw, 2011. "Real estate investors, the leverage cycle, and the housing market crisis," Staff Reports 514, Federal Reserve Bank of New York.
  4. Christopher D Carroll, 1990. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," Economics Working Paper Archive 371, The Johns Hopkins University,Department of Economics, revised Aug 1996.
  5. Edward L. Glaeser & Joshua D. Gottlieb & Joseph Gyourko, 2010. "Can Cheap Credit Explain the Housing Boom?," NBER Working Papers 16230, National Bureau of Economic Research, Inc.
  6. John Geanakoplos, 2009. "The Leverage Cycle," Cowles Foundation Discussion Papers 1715R, Cowles Foundation for Research in Economics, Yale University, revised Jan 2010.
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