Sunspots and Credit Frictions
نویسندگان
چکیده
We examine a general equilibrium model with collateral constraints and increasing returns to scale in production. The utility function is nonseparable, with no income e¤ect on the consumers choice of leisure. Unlike this model without a collateral constraint, we nd that indeterminacy of equilibria is possible. Hence, business cycles can be driven by self-ful lling expectations. This is the case for more realistic parametrizations than in previous, similar models without these features. Keywords: Business cycles, Credit markets, Collateral Constraint, Sunspots. JEL Classi cation: E32
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