Do Capital Market Imperfections Exacerbate Output Fluctuations ?

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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Year of publication:	1996-05
Authors:	BACCHETTA, Philippe ; CAMINAL, CRamon
Institutions:	Départment d'économétrie et d'économie politique (DEEP), Faculté des Hautes Études Commerciales (HEC)
Subject:	credit market imperfection \| agency costs \| business cycles

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Series:	Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP).
Type of publication:	Book / Working Paper
Notes:	Published in European Economic Review, vol.44, 2000, pp. 449-468 30 pages
Classification:	E44 - Financial Markets and the Macroeconomy ; E32 - Business Fluctuations; Cycles
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005481740