We investigate how banks' boundedly rational learning influences their views about default risks over the business cycle. Our analysis details the direction and the magnitude of these effects assuming that banks update probability in a Bayesian way. With a limited experience span lenders are...

This paper studies how boundedly rational default expectations affect the credit cycle. I propose a simple model of oligopolistic bank competition which serves to compare situations with just a portion of boundedly rational banks to situations where either all banks are rational or all banks are...

We investigate the circumstances in which business cycle forecasting is beneficial for business by addressing both the short-run and the long-run aspects. For an assessment of short-run forecasting we make a distinction between using publicly available information of cycle probabilities and the...

This study takes up Keynes' ideas concerning long-term expectations, particularly his notion that expectations are subject to sudden changes with strong effects on economic activity. We start by detailing Keynes' views regarding the nature of expectations and their role in the business cycle. I...

Business cycles have historically been an important topic for behaviorally orientedeconomists. The concept of an economic and financial cycle based on interlocking mechanismsleading from the recession to the boom was developed in the 18th and 19th century. The earlybehavioral economics of the...