We extend the Carlstrom and Fuerst (1997) agency cost model of business cycles by including time varying uncertainty in the technology shocks that affect capital production. We first demonstrate that standard linearization methods can be used to solve the model yet second moment effects still...

Asset Prices, Booms and Recessions"" is a book on Financial Economics from a dynamic perspective. It focuses on the dynamic interaction of financial markets and economic activity. The financial markets to be studied here encompasses the money and bond market, credit market, stock market and...