Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis

Posted: 17 Jul 1998

See all articles by Charles T. Carlstrom

Charles T. Carlstrom

Federal Reserve Bank of Cleveland

Timothy S. Fuerst

University of Notre Dame

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

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

Charles T. Carlstrom

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101-1387
United States
216-579-2294 (Phone)
216-579-3050 (Fax)

Timothy S. Fuerst (Contact Author)

University of Notre Dame ( email )

Notre Dame, IN 46556
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,494
PlumX Metrics