Housing market bubbles and business cycles in an agent-based credit economy

This paper investigates the housing and mortgage markets by means of an agent-based macroeconomic model of a credit network economy. A set of computational experiments have been carried out in order to explore the effects of different households' creditworthiness conditions required by banks in...

Full description

Saved in:
Bibliographic Details
Published in:Economics. The open-access, open-assessment e-journal open-assessment e-journal, 2014-12, Vol.8 (2014-8), p.1-42
Main Authors: Erlingsson, Einar Jon, Teglio, Andrea, Cincotti, Silvano, Stefansson, Hlynur, Sturlusson, Jon Thor, Raberto, Marco
Format: Article
Language:English
Subjects:
agent-based model
Credit cycles
E20
E25
G21
housing market
R31
R38
subprime lending
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper investigates the housing and mortgage markets by means of an agent-based macroeconomic model of a credit network economy. A set of computational experiments have been carried out in order to explore the effects of different households' creditworthiness conditions required by banks in order to grant a mortgage. Results show that easier access to credit inflates housing prices, triggering a short run output expansion. However, the artificial economy becomes more unstable and prone to recessions. With stricter conditions the economy is more stable and does not fall into serious recessions, although a too severe regulation can slow down economic growth.
ISSN:1864-6042
1864-6042
DOI:10.5018/economics-ejournal.ja.2014-8