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Type: Journal article
Title: Sunspots and credit frictions
Author: Harrison, S.
Weder, M.
Citation: Macroeconomic Dynamics, 2013; 17(5):1055-1069
Publisher: Cambridge Univ Press
Issue Date: 2013
ISSN: 1365-1005
Statement of
Sharon G. Harrison and Mark Weder
Abstract: We 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 parameterizations than in previous, similar models without these features.
Keywords: Business cycles; credit markets; collateral constraint; sunspots
Rights: © 2012 Cambridge University Press
RMID: 0020130243
DOI: 10.1017/S1365100511000836
Appears in Collections:Economics publications

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