Integrating the housing market into an agent-based economic model
In this paper, we develop an agent-based model of the housing market and integrate it into a larger agent-based artificial economy. The model is characterized by four types of agents: households, firms, banks and a central bank, which interact through different types of markets: a consumption goods market, a labor market, a housing market and a credit market. We model a wealth effect of housing wealth into households consumption budget as the main link between the housing market and the real economy. Banks will extend mortgages to households only if the expenditure on housing, as a proportion of total income, is lower than a given threshold (β). Different simulations are preformed to see how changing βeffects the housing market and the real economy. We find that by lowering the constraint on bank lending, i.e. increasing β, housing prices boom, positively affecting the real economy
KeywordsInterest Rate Central Bank Housing Price Housing Market Real Economy
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