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Do capital market imperfections exacerbate output fluctuations?

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  • Bacchetta, Philippe
  • Caminal, Ramon

Abstract

We develop a dynamic general equilibrium macroeconomic model where a proportion of firms are credit constrained due to asymmetric information. In general, a macroeconomic shock has additional effects created by a reallocation of funds between credit-constrained and unconstrained firms. We show, however, that the output response to shocks is not necessarily amplified and can be dampened by the presence of asymmetric information.
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  • Bacchetta, Philippe & Caminal, Ramon, 2000. "Do capital market imperfections exacerbate output fluctuations?," European Economic Review, Elsevier, vol. 44(3), pages 449-468, March.
  • Handle: RePEc:eee:eecrev:v:44:y:2000:i:3:p:449-468
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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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