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Modelling a Housing and Mortgage Crisis

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  • Alexandros Vardoulakis
  • Dimitrios Tsomocos

  • Charles Goodhart

Abstract

The purpose of this paper is to explore financial instability in this case due to a housing crisis and defaults on mortgages. The model incorporates heterogeneous banks and households. Mortgages are secured by collateral, which is equal to the amount of housing which agents purchase. Individual default is spread through the economy via the interbank market. Several comparative statics illustrate the directional effects of a variety of shocks in the economy.

Suggested Citation

  • Alexandros Vardoulakis & Dimitrios Tsomocos & Charles Goodhart, 2010. "Modelling a Housing and Mortgage Crisis," FMG Discussion Papers dp649, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp649
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    Cited by:

    1. Avanzini, Diego & Martı́nez, Juan Francisco & Pérez, Vı́ctor, 2020. "Assessing mortgage default risk in full-recourse economies, with an application to the case of Chile," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    2. Li Lin & Dimitrios P. Tsomocos & Alexandros P. Vardoulakis, 2019. "Debt deflation effects of monetary policy," Chapters, in: Financial Regulation and Stability, chapter 9, pages 245-258, Edward Elgar Publishing.

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