This paper develops a tractable macroeconomic model with a banking sector in which banks face endogenous borrowing constraints. There is no uncertainty about economic fundamentals. Banking bubbles can emerge through a positive feedback loop mechanism. Changes in household confidence can cause...

Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurence is often accompanied by credit booms. Incorporating these features, we provide a two-sector endogenous growth model with credit-driven stock price bubbles. Bubbles have a credit...

We provide an infinite-horizon model of a production economy with bubbles, in which firms meet stochastic investment opportunties and face credit constraints. Capital is not only an input for production, but also serves as collateral. We show that bubbles on this reproducible asset may arise,...

We present an estimated DSGE model of stock market bubbles and business cycles using Bayesian methods. Bubbles emerge through a positive feedback loop mechanism supported by self-fulfilling beliefs. We identify a sentiment shock which drives the movements of bubbles and is transmitted to the...

In the presence of both convex and nonconvex capital adjustment costs in a dynamic general equilibrium model, corporate tax policy generates both intensive and extensive margin effects via the channel of marginal Q. Its impact is determined largely by the strength of the extensive margin effect,...

This paper introduces endogenous credit constraints in a search model of unemployment. These constraints generate multiple equilibria supported by self-fulfilling beliefs. A stock market bubble exists through a positive feedback loop mechanism. The collapse of the bubble tightens the credit...

In the U.S. economy over the past twenty five years, house prices exhibit fluctuations considerably larger than house rents and these large fluctuations tend to move together with business cycles. We build a simple theoretical model to characterize these observations by showing the tight...

We provide an infinite-horizon model of a production economy with credit-driven stock- price bubbles, in which firms meet stochastic investment opportunities and face credit constraints. Capital is not only an input for production, but also serves as collateral. We show that bubbles on this...

Evidence shows that asset price bubbles typically precede financial crises and financial crises are accompanied by the collapse of bubbles. In addition, stock market booms and busts are typically associated with credit market booms and busts. The recent US housing and stock markets bubbles and...

Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurence is often accompanied with credit booms. Incorporating these features, we provide a two-sector endogenous growth model with credit-driven stock price bubbles. Bubbles have a...