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| Author: | Cooley, T. Nam, K. |
| Title: | Asymmetric information, financial intermediation, and business cycles |
| Journal: | Economic Theory
1998 : VOL. 12:3, p. 599-620 |
| Index terms: | FINANCE RISK ECONOMICS |
| Language: | eng |
| Abstract: | This incorporates a debt contractic problem with asymmetric information into a standard monetary business cycle model. The model incorporates a limited participation assumption in order to induce a liquidity effect of monetary shocks and propagate monetary disturbances. The model economy shows that a positive money supply shock generates a decrease in nominal interest rates and an increase in output level. Asymmetric information amplifies the response of capital to the money supply shock, but does not propagate them in any other way. |
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