American Economic Review Vol. 87 No. 5 1997
Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis
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 lowest--a point in time several periods after the initial shock.
- Volume
- 87
- Issue
- 5
- Pages
- 893-910
- Sources
- bibtex:phds-export.bib