Consumer sentiment and business cycles: a Neimark-Sacker bifurcation scenario

Abstract

We seek to demonstrate that consumer sentiment may create fluctuations in economic activity. Our nonlinear discrete-time model possesses, for instance, a Neimark-Sacker bifurcation, after which a stable steady state is replaced by (quasi-)periodic motion. Countercyclical interventions to stabilize the economy may even produce complex (chaotic) business cycles.