Resource title

Limited Pledgeability, Asset Prices, and Macroeconomic Fluctuations

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image for OpenScout resource :: Limited Pledgeability, Asset Prices, and Macroeconomic Fluctuations

Resource description

According to the theory of incomplete contracts, given nonverifiable entrepreneurial project choices together with divergent objectives between an entrepreneur and its outside financier, the entrepreneur can credibly pledge only part of its project outcome for external funding. Meanwhile, entrepreneurial net worth must be put as down payment to ameliorate agency costs. In a real dynamic general equilibrium model with heterogeneous agents and nonverifiable project choices, endogenous agency costs significantly change the businesscycle pattern in the sense that the model can replicate an important empirical fact, the amplified hump-shaped output behavior. Furthermore, variable asset prices can affect entrepreneurial net worth and then subsequently change the dynamic features of aggregate output along business cycles.

Resource author

Haiping Zhang

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22917

Resource license

Adapt according to the presented license agreement and reference the original author.