| Author: | Carlstrom, C. Fuerst, T. |
| Title: | Agency costs and business cycles |
| Journal: | Economic Theory
1998 : VOL. 12:3, p. 583-598 |
| Index terms: | ECONOMIC THEORY AGENCY THEORY BUSINESS CYCLES |
| Language: | eng |
| Abstract: | This paper develops a model with endogenous agency costs that is otherwise quite similar to the canonical real business cycle model. The traditional assumption in the literature is that these agency costs arise in the production of investment goods. In contrast, this paper assumes that these costs are all encompassing in the sense that they arise in the production of aggregate output. The paper explores both the importance of the investment vs. output assumption for business cycles dynamics, and the conditions under which these agency models can deliver amplification and/or persistence. |
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