Three original models which explain business cycles as a result of self-fulfilling expectations are presented. The models are founded on the structue of dynamic general equilibrium theory. Market power and increasing returns to scale are introduced which allow indeterminancy of the Rational...

The business cycle effects of bank capital regulatory regimes are examined in a New Keynesian model with credit market imperfections and a cost channel of monetary policy. Key features of the model are that bank capital increases incentives for banks to monitor borrowers, thereby reducing the...

The paper presents a model of housing and credit cycles featuring distorted beliefs and comovement and mutual reinforcement between house price expectations and price developments via credit expansion/contraction. Positive (negative) development in house prices fuels optimism (pessimism) and...