This paper analyzes the roles of credit market conditions in endogenous formation of housing-market boom-bust cycles in a business cycle model. When households are uncertain about the duration of a temporary high income growth period, expected future house prices rise during the high growth...

This paper introduces asymmetric information into a competitive asset market in a dynamic general-equilibrium model with borrowing constraints. In the presence of borrowing constraints, asset sales become a crucial means for agents to finance opportunities to invest in new assets. In this...

This paper presents a business cycle model capturing the stylized features of housing-market boom-bust cycles in developed countries. The model implies that over-optimism of mortgage borrowers generates housing-market boom-bust cycles, if mortgage borrowers are credit-constrained and savers do...