Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis
Posted: 17 Jul 1998
Abstract
This paper develops a computable general equilibrium model in which endogenous agency costs can potentially alter business-cycle dynamics. A principal conclusion is that the agency-cost model replicates the empirical fact that output growth displays positive autocorrelation at short horizons. This hump-shaped output behavior arises because households delay their investment decisions until agency costs are at their lowers--a point in time several periods after the initial shock.
JEL Classification: E32, E44
Suggested Citation: Suggested Citation
Carlstrom, Charles T. and Fuerst, Timothy S., Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis. Available at SSRN: https://ssrn.com/abstract=108569
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