Sunspots and Credit Frictions
AbstractWe examine a general equilibrium model with collateral constraints and increasing returns to scale in production. The utility function is nonseparable, with no income effect on the consumer¡¯s choice of leisure. Unlike this model without a collateral constraint, we find that indeterminacy of equilibria is possible. Hence, business cycles can be driven by self-fulfilling expectations. This is the case for more realistic parametrizations than in previous, similar models without these features.
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Bibliographic InfoPaper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 201001.
Date of creation: 15 Jan 2010
Date of revision:
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More information through EDIRC
Business cycles; Credit markets; Collateral Constraint; Sunspots.;
Other versions of this item:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-23 (All new papers)
- NEP-CBA-2010-01-23 (Central Banking)
- NEP-DGE-2010-01-23 (Dynamic General Equilibrium)
- NEP-MAC-2010-01-23 (Macroeconomics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Costas Azariadis & Leo Kaas, 2012.
"Self-fulfilling credit cycles,"
2012-047, Federal Reserve Bank of St. Louis.
- Costas Azariadis & Leo Kaas, 2012. "Self-Fulfilling Credit Cycles," Working Paper Series of the Department of Economics, University of Konstanz 2012-16, Department of Economics, University of Konstanz.
- NUTAHARA Kengo, 2010.
"Asset Prices and Monetary Policy in a Sticky-Price Economy with Financial Frictions,"
10060, Research Institute of Economy, Trade and Industry (RIETI).
- Nutahara, Kengo, 2010. "Asset prices and monetary policy in a sticky-price economy with financial frictions," MPRA Paper 24113, University Library of Munich, Germany.
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