If financial markets are perfect, the choice of the sources of finance does not influence investment decisions. However, financial markets are considered to be far from perfect. This review concentrates on the role of information asymmetry in determining real investment decisions. Despite the...

This review concentrates on the role of information asymmetry in financial markets in amplification and propagation of short-run output fluctuations. We find that the so-called Financial Accelerator effect provides a consistent, first principle based, theoretical framework for the analysis of...