The proposed framework allows one to introduce nonlinear dynamics into the model, making it feasible to obtain, for reasonable parameter values, endogenous fluctuations. These are triggered by a Neimark-Sacker bifurcation.
Originality/value – By introducing consumer confidence or consumer sentiment, it is possible to integrate the evaluation of growth and cycles into a unified framework. It is possible to explain business cycles as the result of the consumers' reaction to the expected performance of the economic system.