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

John Geanakoplos, Robert L. Axtell, J. Doyne Farmer (), Peter Howitt, Benjamin Conlee, Jonathan Goldstein, Matthew Hendrey, Nathan M. Palmer and Chun-Yi Yang

American Economic Review, 2012, vol. 102, issue 3, pages 53-58

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.

Date: 2012
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