A dynamic bargaining model with endogenous prices, wages and investment is presented. It accounts for capital and labour underutilization at steady state and displays various patterns of unemployment rate and capacity utilization rate comovements as a function of demand and supply shocks. The...

The aim of this paper is to study the effects of credit constraints on the equilibrium aggregate capital stock. Credit constraints are the consequence of asymmetric information and moral hazard on the credit markets. When the equilibrium interest rate is low, entrepreneurs may have the...