Time-varying uncertainty and the credit channel

Arbeitspapier

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 moments enter the economy's equilibrium policy functions. We then demonstrate that an increase in uncertainty causes, ceteris paribus, a fall in investment supply. A second key result is that time varying uncertainty results in countercyclical bankruptcy rates - a finding which is consistent with the data and opposite the result in Carlstrom and Fuerst. Third, we show that persistence of uncertainty affects both quantitatively and qualitatively the behavior of the economy. However, the shocks to uncertainty imply a quantitatively small role for uncertainty over the business cycle.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 06-1

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) ; Money and Interest Rates: General ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Salyer, Kevin D. ; Dorofeenko, Victor ; Lee, Gabriel
• Ereignis: Veröffentlichung
• (wer): University of California, Department of Economics
• (wo): Davis, CA
• (wann): 2005

Weitere Informationen

• Handle: http://hdl.handle.net/10419/31373
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ