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Macroeconomic implications of mortgage loans requirements: An agent based approach

Bulent Ozel (), Reynold Nathanael, Marco Raberto (), Andrea Teglio and Silvano Cincotti ()
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Bulent Ozel: Department of Economics, Universitat Jaume I, Castellón, Spain

No 2016/05, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: This paper presents an enhancement of the Eurace agent-based model by designing a housing market with a related mortgage lending device. The presence of the housing market has some important macroeconomic implications, mainly given by the additional amount of endogenous money injected into the economy through the new mortgage device. This additional money generally helps to increase and stabilize aggregated demand, thus improving the main economic indicators. However, if the mortgage lending regulation is relaxed too much, by raising the debt-service-to-income ratio (DSTI), then the additional supply of mortgages doesn’t increase the macroeconomic performance any more, and undermines the stability of the economic system. Following some recent discussion, a stock control regulation that targets households net wealth (a stock), instead of income (a flow), is designed and analyzed. Results show that stock control regulation can be effectively combined with DSTI in order to increase the stability of the housing market and of the whole economy. Moreover, stock control regulation exhibits the interesting property to directly affect mortgage distribution among households.

Keywords: Computational techniques; simulation modeling; business fluctuations; cycles; money supply; credit; money multipliers (search for similar items in EconPapers)
JEL-codes: C63 E32 E51 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2016
New Economics Papers: this item is included in nep-cmp, nep-mac and nep-ure
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Journal Article: Macroeconomic implications of mortgage loan requirements: an agent-based approach (2019) Downloads
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