Abstract
This paper introduces an agent-based model of a housing market with macro-prudential policy experiments. Specifically, the simulation model is used to examine the effects of a policy setting on loan-to-value (LTV) and debt-to-income (DTI), which are policy instruments several governments use to regulate the housing market. The simulation model illustrates the interactions among the households, the house suppliers, and the real estate brokers. We model each household in the population as either seller or buyer, and some of households may behave as speculators in the housing market. To better understand the impact of the policies, we used the real-world observations from the Korean housing market, which include various economic conditions, policy variables, and Korean census data. Our baseline model is quantitatively validated to the price index and the transaction volume of the past Korean housing market. After validation, we show the empirical effectiveness of setting LTV and DTI towards house prices, transaction volumes, and the amount of households' mortgages. Furthermore, we investigate the simulation results for the owner-occupier rate of households. These investigations provide the policy analyses in Korea's housing market, and other governments with LTV and DTI regulations.
Highlights
We used the Korean census data to set the initial characteristics of the household agents, and we used the actual economic values of Korea as model parameters that represent the economic environment of the model
We investigated the impact of the LTV and DTI regulations on both macro and micro levels
The DTI regulation is a policy tool that has inconsistent e ects depending on the markets
Summary
Agent-based modeling (ABM) has been used in diverse application areas, such as military, transportation, city planning, health care, and economics These application areas have a common understanding on interactions between individuals within society. Any government needs to stabilize the housing market because housing is a fundamental need for their population To this end, the governments may intervene in the market with various approaches, from interest rates in the capitalized society to the enforced redistribution of housing in the communist society. The governments may intervene in the market with various approaches, from interest rates in the capitalized society to the enforced redistribution of housing in the communist society Among these interventions, this paper explores a set of prudential policies, allowing governments to intervene in the market from the macro standpoint.
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