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Agency Costs in Dynamic Economic Models

Author

Listed:
  • Azariadis, Costas
  • Chakraborty, Shankha

Abstract

The authors consider an overlapping generations economy where capital is produced from bank loans under stochastic constant returns to scale and subject to idiosyncratic shocks whose realizations are costly to verify. Their formulation differs from earlier work in permitting investment projects to be infinitely divisible and private agency costs to be convex. If there are external economies to financial intermediation, then deviations from steady-state output are negatively correlated with the spread between loan and deposit rates. Moreover, the capital stock correspondence is set-valued, a result consistent with poverty traps, growth cycles, and hump-shaped impulse response functions.

Suggested Citation

  • Azariadis, Costas & Chakraborty, Shankha, 1999. "Agency Costs in Dynamic Economic Models," Economic Journal, Royal Economic Society, vol. 109(455), pages 222-241, April.
    • Handle: RePEc:ecj:econjl:v:109:y:1999:i:455:p:222-41
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    Citations

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    Cited by:

    1. Joydeep Bhattacharya & Shankha Chakraborty, 2005. "What do information frictions do?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 651-675, October.
    2. K Blackburn & D Varvarigos, 2005. "Growth, Uncertainty and Finance," Centre for Growth and Business Cycle Research Discussion Paper Series 48, Economics, The University of Manchester.
    3. Aadland, David, 2005. "Detrending time-aggregated data," Economics Letters, Elsevier, vol. 89(3), pages 287-293, December.
    4. Antonio Acconcia, 2006. "Endogenous Corruption and Tax Evasion in a Dynamic Model," CSEF Working Papers 154, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Nov 2006.
    5. Christian Keuschnigg, 2004. "Venture Capital Backed Growth," Journal of Economic Growth, Springer, vol. 9(2), pages 239-261, June.
    6. House, Christopher L., 2006. "Adverse selection and the financial accelerator," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1117-1134, September.
    7. Costas Azariadis & Leo Kaas, 2004. "Endogenous Financial Development and Multiple Growth Regimes," Economic Working Papers at Centro de Estudios Andaluces E2004/08, Centro de Estudios Andaluces.
    8. Andres Erosa, 2001. "Financial Intermediation and Occupational Choice in Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 303-334, April.
    9. Chakrabarty, Debajyoti, 2002. "Growth and business cycles with imperfect credit markets," ZEI Working Papers B 29A-2002, University of Bonn, ZEI - Center for European Integration Studies.
    10. Keith Blackburn & David Chivers, 2015. "Fearing the worst: the importance of uncertainty for inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 345-370, October.
    11. Soyolmaa Batbekh & Keith Blackburn, 2008. "On the Macroeconomics of Microfinance," Centre for Growth and Business Cycle Research Discussion Paper Series 106, Economics, The University of Manchester.
    12. Keith Blackburn & Yuanyuan Wang, 2009. "Uncertainty, Entrepreneurship and the Organisation of Corruption," Centre for Growth and Business Cycle Research Discussion Paper Series 133, Economics, The University of Manchester.
    13. Christopher L. House, 2002. "Adverse Selection and the Accelerator," Macroeconomics 0211015, University Library of Munich, Germany.

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