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Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis

  • Carlstrom, Charles T
  • Fuerst, Timothy S

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. Copyright 1997 by American Economic Association.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 87 (1997)
Issue (Month): 5 (December)
Pages: 893-910

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Handle: RePEc:aea:aecrev:v:87:y:1997:i:5:p:893-910
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  1. An, Chong-Bum & Haveman, Robert & Wolfe, Barbara, 1993. "Teen Out-of-Wedlock Births and Welfare Receipt: The Role of Childhood Events and Economic Circumstances," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 195-208, May.
  2. Neil G. Bennett & David E. Bloom & Cynthia K. Miller, 1993. "The Influence of Nonmarital Childbearing on the Formation of First Marriages," NBER Working Papers 4564, National Bureau of Economic Research, Inc.
  3. Elizabeth T. Powers, 1994. "The impact of AFDC on birth decisions and program participation," Working Paper 9408, Federal Reserve Bank of Cleveland.
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