"This paper shows that economic fluctuations can be largely demand-driven. In particular, the stylized open-economy business cycle regularities documented by Feldstein and Horioka (1980) and Backus, Kehoe and Kydland (JPE 1992) can be explained by the standard general equilibrium theory if...

An empirical model of managers' demand for agency goods is derived and estimated using the Almost Ideal Demand System of Deaton and Muellbauer (AER 1980). As in Jensen and Meckling (JFE 1976), we derive managers' demand for agency goods by maximizing a managerial utility function where managers...