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Agency Costs in Dynamic Economic Models

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  • Azariadis, Costas
  • Chakraborty, Shankha

Abstract

The authors consider an overlapping generations economy where capital is produced from bank loans under stochastic constant returns to scale and subject to idiosyncratic shocks whose realizations are costly to verify. Their formulation differs from earlier work in permitting investment projects to be infinitely divisible and private agency costs to be convex. If there are external economies to financial intermediation, then deviations from steady-state output are negatively correlated with the spread between loan and deposit rates. Moreover, the capital stock correspondence is set-valued, a result consistent with poverty traps, growth cycles, and hump-shaped impulse response functions.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 109 (1999)
Issue (Month): 455 (April)
Pages: 222-41

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Handle: RePEc:ecj:econjl:v:109:y:1999:i:455:p:222-41

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Cited by:
  1. Costas Azariadis & Leo Kaas, 2004. "Endogenous Financial Development and Multiple Growth Regimes," Economic Working Papers at Centro de Estudios Andaluces E2004/08, Centro de Estudios Andaluces.
  2. House, Christopher L., 2006. "Adverse selection and the financial accelerator," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1117-1134, September.
  3. Joydeep Bhattacharya & Shankha Chakraborty, 2005. "What do information frictions do?," Economic Theory, Springer, vol. 26(3), pages 651-675, October.
  4. Dimitrios Varvarigos & Keith Blackburn, 2005. "Growth, Uncertainty and Finance," Money Macro and Finance (MMF) Research Group Conference 2005 12, Money Macro and Finance Research Group.
  5. Andres Erosa, 2001. "Financial Intermediation and Occupational Choice in Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 303-334, April.
  6. Christian Keuschnigg, 2004. "Venture Capital Backed Growth," Journal of Economic Growth, Springer, vol. 9(2), pages 239-261, 06.
  7. David Aadland, 2002. "Detrending Time-Aggregated Data," Macroeconomics 0301007, EconWPA.
  8. Chakrabarty, Debajyoti, 2002. "Growth and business cycles with imperfect credit markets," ZEI Working Papers B 29A-2002, ZEI - Center for European Integration Studies, University of Bonn.
  9. Christopher L. House, 2002. "Adverse Selection and the Accelerator," Macroeconomics 0211015, EconWPA.
  10. Antonio Acconcia, 2006. "Endogenous Corruption and Tax Evasion in a Dynamic Model," CSEF Working Papers 154, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Nov 2006.

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