This thesis develops a beta version of a new agent-based model of the Danish housing market, which is well suited to throw light on a range of aspects concerning business cycles and macro-prudential regulation. In particular, the model is employed to analyze the effects of income shocks, mortgage rate shocks and regulation on debt-to-income limits.
The thesis first presents an introduction to the subject of agent-based modeling. Agent-based models are computer simulations of markets or entire economies, in which the agents are equipped with a set of rules to govern their behavior. An agent-based model therefore constitutes a virtual market, which is potentially a 1:1 representation of a real market. By this property, agent-based models distinguish themselves from traditional economic models, which only holds a single or a few representative agents (if not a continuum of identical ones). As shown in the review, agent-based modeling have shown promising progress in several fields of economics, but it seems particularly relevant for analysis of systemic risk and market transitions, because the dynamics are not conformed to an a priori calculated equilibrium. The model developed in this thesis has been programmed from scratch in the object oriented language C#.