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Monetary shocks, agency costs, and business cycles Author info | Abstract | Publisher info | Download info | Related research | Statistics Charles T. Carlstrom
Timothy S. Fuerst
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This paper integrates money into a real model of agency costs. Money is introduced by imposing a cash-in-advance constraint on a subset of transactions. The underlying real model is a standard real-business-cycle model modified to include endogenous agency costs. The paper’s chief contribution is to demonstrate how the monetary transmission mechanism is altered by these endogenous agency costs. In particular, do agency costs amplify and/or propagate monetary shocks?
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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number
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Date of creation: 2000Date of revision:
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Keywords: Business cycles ; Monetary policy ; Other versions of this item:
Article Carlstrom, Charles T. & Fuerst, Timothy S., 2001.
"Monetary shocks, agency costs, and business cycles ,"
Carnegie-Rochester Conference Series on Public Policy ,
Elsevier, vol. 54(1), pages 1-27, June.
[Downloadable!] (restricted) This paper has been announced in the following NEP Reports :
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Stockman, Alan C., 1981.
"Anticipated inflation and the capital stock in a cash in-advance economy ,"
Journal of Monetary Economics ,
Elsevier, vol. 8(3), pages 387-393.
[Downloadable!] (restricted)
Charles T. Carlstrom & Timothy S. Fuerst, 1996.
"Agency costs, net worth, and business fluctuations: a computable general equilibrium analysis ,"
Working Paper
9602, Federal Reserve Bank of Cleveland.
[Downloadable!]
Other versions:
Carlstrom, Charles T & Fuerst, Timothy S, 1997.
"Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis ,"
American Economic Review ,
American Economic Association, vol. 87(5), pages 893-910, December.
[Downloadable!] (restricted) Bernanke, Ben & Gertler, Mark, 1989.
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American Economic Review ,
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Robert Townsend, 1979.
"Optimal contracts and competitive markets with costly state verification ,"
Staff Report
45, Federal Reserve Bank of Minneapolis.
[Downloadable!]
Other versions: Charles T. Carlstrom & Timothy S. Fuerst, 1995.
"Interest rate rules vs. money growth rules: a welfare comparison in a cash-in-advance economy ,"
Working Paper
9504, Federal Reserve Bank of Cleveland.
[Downloadable!]
Other versions: Warner, Jerold B, 1977.
"Bankruptcy Costs: Some Evidence ,"
Journal of Finance ,
American Finance Association, vol. 32(2), pages 337-47, May.
[Downloadable!] (restricted)
Cooley, Thomas F & Hansen, Gary D, 1989.
"The Inflation Tax in a Real Business Cycle Model ,"
American Economic Review ,
American Economic Association, vol. 79(4), pages 733-48, September.
[Downloadable!] (restricted)
Other versions:
Cooley, T.F. & Hansen, G.D., 1988.
"The Inflation Tax In A Real Business Cycle Model ,"
Papers
88-05, Rochester, Business - General.
Thomas F. Cooley & Gary D. Hansen, 1987.
"The Inflation Tax in a Real Business Cycle Model ,"
UCLA Economics Working Papers
496, UCLA Department of Economics.
[Downloadable!] Cooley, T.F. & Hansen, G.D., 1988.
"The Inflation Tax In A Real Business Cycle Model ,"
RCER Working Papers
155, University of Rochester - Center for Economic Research (RCER).
Bernanke, B. & Gertler, M. & Gilchrist, S., 1998.
"The Financial Accelerator in a Quantitative Business Cycle Framework ,"
Working Papers
98-03, C.V. Starr Center for Applied Economics, New York University.
[Downloadable!]
Other versions:
Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998.
"The Financial Accelerator in a Quantitative Business Cycle Framework ,"
NBER Working Papers
6455, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999.
"The financial accelerator in a quantitative business cycle framework ,"
Handbook of Macroeconomics ,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393
Elsevier.
[Downloadable!] (restricted) Thomas Cooley & Vincenzo Quadrini, 2006.
"Monetary policy and the financial decisions of firms ,"
Economic Theory ,
Springer, vol. 27(1), pages 243-270, 01.
[Downloadable!] (restricted)
Williamson, Stephen D, 1987.
"Costly Monitoring, Loan Contracts, and Equilibrium Credit Rationing ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 102(1), pages 135-45, February.
[Downloadable!] (restricted)
Other versions: Timothy S. Fuerst & Charles T. Carlstrom, 1998.
"Agency costs and business cycles ,"
Economic Theory ,
Springer, vol. 12(3), pages 583-597.
[Downloadable!] (restricted)
Gale, Douglas & Hellwig, Martin, 1985.
"Incentive-Compatible Debt Contracts: The One-Period Problem ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 52(4), pages 647-63, October.
[Downloadable!] (restricted)
Alderson, Michael J. & Betker, Brian L., 1995.
"Liquidation costs and capital structure ,"
Journal of Financial Economics ,
Elsevier, vol. 39(1), pages 45-69, September.
[Downloadable!] (restricted)
Kwanghee Nam & Thomas F. Cooley, 1998.
"Asymmetric information, financial intermediation, and business cycles ,"
Economic Theory ,
Springer, vol. 12(3), pages 599-620.
[Downloadable!] (restricted)
Fuerst, Timothy S, 1995.
"Monetary and Financial Interactions in the Business Cycle ,"
Journal of Money, Credit and Banking ,
Blackwell Publishing, vol. 27(4), pages 1321-38, November.
[Downloadable!] (restricted)
Other versions:
Full
references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Fiorella De Fiore & Harald Uhlig, 2005.
"Bank finance versus bond finance: what explains the differences between US and Europe? ,"
SFB 649 Discussion Papers
SFB649DP2005-042, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
[Downloadable!]
Other versions: Kunhong Kim & Iris Claus, 2004.
"Agency costs and asymmetric information in a small open economy: a dynamic general equilibrium model ,"
Econometric Society 2004 Far Eastern Meetings
787, Econometric Society.
[Downloadable!]
Charles T. Carlstrom & Timothy S. Fuerst, 2001.
"Monetary policy in a world without perfect capital markets ,"
Working Paper
0115, Federal Reserve Bank of Cleveland.
[Downloadable!]
Cordoba, Juan & Ripoll, Marla, 2002.
"Credit Cycles Redux ,"
Working Papers
2002-07, Rice University, Department of Economics.
[Downloadable!]
Other versions:
Juan Cordoba & Marla Ripoll, 2002.
"Credit Cycles Redux ,"
Macroeconomics
0210004, EconWPA.
[Downloadable!] Juan-Carlos Cordoba & Marla Ripoll, 2004.
"Credit Cycles Redux ,"
International Economic Review ,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1011-1046, November.
[Downloadable!] (restricted) Alvaro Aguiar & Inês Drumond, 2007.
"Monetary Policy Amplification Effects through a Bank Capital Channel ,"
Money Macro and Finance (MMF) Research Group Conference 2006
47, Money Macro and Finance Research Group.
[Downloadable!]
David Aikman & Matthias Paustian, .
"Bank capital, asset prices and monetary policy ,"
Bank of England working papers
305, Bank of England.
[Downloadable!]
repec:bep:mactop:v:6:y:2007:i:3:p:1181-1181 is not listed on IDEAS
Other versions:
Fischer, Andreas & Michael J Dueker & Robert D Dittmar, 2003.
"Stochastic Capital Depreciation and the Comovement of Hours and Productivity ,"
Royal Economic Society Annual Conference 2003
80, Royal Economic Society.
[Downloadable!] Michael J. Dueker & Andreas M. Fischer & Robert D. Dittmar, 2004.
"Stochastic capital depreciation and the comovement of hours and productivity ,"
Working Papers
2002-003, Federal Reserve Bank of St. Louis.
[Downloadable!] Michael Dueker & Andreas Fischer & Robert D. Dittmar, 2002.
"Stochastic Capital Depreciation and the Comovement of Hours and Productivity ,"
Working Papers
02.01, Swiss National Bank, Study Center Gerzensee.
[Downloadable!] Dittmar, Robert & Dueker, Michael & Fischer, Andreas M, 2002.
"Stochastic Capital Depreciation and the Comovement of Hours and Productivity ,"
CEPR Discussion Papers
3192, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Michael Dueker & Andreas Fischer & Robert Dittmar, 2007.
"Stochastic Capital Depreciation and the Co-movement of Hours and Productivity ,"
The B.E. Journal of Macroeconomics ,
Berkeley Electronic Press, vol. 0(3).
[Downloadable!] Matteo Iacoviello, 2002.
"House prices, borrowing constraints and monetary policy in the business cycle ,"
Boston College Working Papers in Economics
542, Boston College Department of Economics, revised 06 Dec 2004.
[Downloadable!]
Other versions: Santiago L.E. Acosta Ormaechea, 2007.
"A Small Open Economy Model with Currency Mismactches and a Financial Accelerator Mechanism ,"
DEGIT Conference Papers
c012_035, DEGIT, Dynamics, Economic Growth, and International Trade.
[Downloadable!]
Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2004.
"The Great Depression and the Friedman-Schwartz Hypothesis ,"
NBER Working Papers
10255, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2004.
"The Great Depression and the Friedman-Schwartz hypothesis ,"
Working Paper
0318, Federal Reserve Bank of Cleveland.
[Downloadable!] Lawrence Christiano & Roberto Motto & Massimo Rostagno, 2004.
"The great depression and the Friedman-Schwartz hypothesis ,"
Working Paper Series
326, European Central Bank.
[Downloadable!] Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003.
"The Great Depression and the Friedman-Schwartz hypothesis ,"
Proceedings ,
Federal Reserve Bank of Cleveland, pages 1119-1215.
Charles Bean & Jens D.J. Larsen & Kalin Nikolov, 2002.
"Financial frictions and the monetary transmission mechanism: theory; evidence and policy implications ,"
Working Paper Series
113, European Central Bank.
[Downloadable!]
Strulik, Holger, 2007.
"The Credit Channel of Tax Policy ,"
Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover
dp-368, Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
[Downloadable!]
Zurlinden, Mathias, 2003.
"Credit in the monetary transmission mechansim: An overview of some recent research using Swiss data ,"
Economic Studies
2005-1, Swiss National Bank.
[Downloadable!]
Matthias Paustian, 2004.
"Welfare Effects of Monetary Policy Rules in a Model with Nominal Rigidities and Credit Market Frictions ,"
Econometric Society 2004 Far Eastern Meetings
597, Econometric Society.
[Downloadable!]
De Fiore, Fiorella & Uhlig, Harald, 2005.
"Bank Finance versus Bond Finance: What Explains the Differences Between the US and Europe? ,"
CEPR Discussion Papers
5213, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Ethan Cohen-Cole & Enrique Martinez-Garcia, 2008.
"The balance sheet channel ,"
Quantitative Analysis Unit Working Paper
QAU08-7, Federal Reserve Bank of Boston.
[Downloadable!]
Charles T. Carlstrom & Timothy S. Fuerst, 2002.
"Imperfect capital markets and nominal wage rigidities ,"
Working Paper
0205, Federal Reserve Bank of Cleveland.
[Downloadable!]
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