I develop an equilibrium model with collateral constraints in which rational agents are uncertain and learn about the equilibrium mapping between fundamentals and collateral prices. Bayesian updating of beliefs by agents can endogenously generate booms and busts in collateral prices and largely...

This paper studies the interaction of agents' collateral price beliefs, credit constraint and aggregate economic activity over the business cycle. Learning strengthens the role of collateral constraints in aggregate fluctuations. Under heterogeneous learning rules, numerical simulations...

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...