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...

Countercyclical markups are a key transmission mechanism in many endogenous business cycle models. Yet, recent findings suggest that aggregate markups in the US are procyclical. The current model addresses this issue. It extends Gall's (1994) composition of aggregate demand model by endogenous...