We introduce sentiments under incomplete information into an otherwise standard real business cycle model. Individual firms receive signals about their idiosyncratic demand shocks which are confounded by sentiments. Sentiments coordinate optimal decisions of individuals through their extraction...

What is the role of production networks in inducing self-fulfilling business cycles? We build a continuous-time multisector business cycle model with input-output linkages and credit constraints to study this. Credit constraints faced by productive firms endogenously create self-fulfilling...