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Modelling a housing and mortgage crisis

Author

Listed:
  • Goodhart, Charles
  • Tsomocos, Dimitri
  • Vardoulakis, Alexandros

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

  • Goodhart, Charles & Tsomocos, Dimitri & Vardoulakis, Alexandros, 2010. "Modelling a housing and mortgage crisis," LSE Research Online Documents on Economics 119090, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:119090
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    File URL: http://eprints.lse.ac.uk/119090/
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    More about this item

    Keywords

    mortgage default; financial fragility; competitive banking; general equilibrium; monetary policy;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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