Following the literature on growth, cycles and financial development, this paper develops an endogenous growth model where the source of endogenous business cycles relates to the allocation of credit between productive investment and consumption. An important role is given to consumer sentiment,...

Models dealing with monetary policy are generally based on microfoundations that characterize the behaviour of representative agents (households and firms). To explain the representative consumer behaviour, it is generally assumed a utility function in which the intertemporal elasticity of...

This paper presents three modified versions of the simple AK endogenous growth model. Such frameworks stress the role of consumers’ sentiment, the impact of fiscal policy and the effect of non-optimal investment decisions made by firms. In all the cases, today’s decisions take into...

Traditionally, observed fluctuations in aggregate economic time series have been mainly modelled as being the result of exogenous disturbances. A better understanding of macroeconomic phenomena, however, surely requires looking directly at the relations between variables that may trigger...

Traditionally, observed fluctuations in aggregate economic time series have been mainly modeled as being the result of exogenous disturbances. A better understanding of macroeconomic phenomena, however, surely requires looking directly at the relations between variables that may trigger...

This paper develops a non-equilibrium dynamic model (NEDyM) with Keynesian features (it allows for a disequilibrium between output and demand and it considers a constant marginal propensity to consume), but where production is undertaken under plain neoclassical conditions (a constant returns to...

There is a recent strand of literature which suggests that second order approximations of linear quadratic objective functions in the steady state vicinity, namely when assuming stochastic scenarios, lead to very interesting and useful results. For example, applications in monetary policy resort...

Traditionally, observed fluctuations in aggregate economic time series have been mainly modeled as being the result of exogenous disturbances. A better understanding of macroeconomic phenomena, however, surely requires looking directly at the relations between variables that may trigger...

Traditionally, observed fluctuations in aggregate economic time series have been mainly modelled as being the result of exogenous disturbances. A better understanding of macroeconomic phenomena, however, surely requires looking directly at the relations between variables that may trigger...

The notion of optimized rational behavior in the formation of expectations is used in this note to study the dynamics of a simple macroeconomic model. In a setting where departures from stability are not possible under perfect foresight, the selection of an optimal degree of rationality may lead...