Financial Fragility and Economic Performance
Ben S. Bernanke,Mark Gertler +1 more
TL;DR: The authors argue that financial instability occurs when entrepreneurs who want to undertake investment projects have low net worth; the heavy reliance on external finance that this implies causes the agency costs of investment to be high.
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Abstract: Financial stability is an important goal of policy, but the relation of financial stability to economic performance and even the meaning of the term itself are poorly understood. This paper explores these issues in a theoretical model. We argue that financial instability, or fragility, occurs when entrepreneurs who want to undertake investment projects have low net worth; the heavy reliance on external finance that this implies causes the agency costs of investment to be high. High agency costs in turn lead to low and inefficient investment. Standard policies for fighting financial fragility can be interpreted as transfers that maintain or increase the net worth of potential borrowers.
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Agency Costs, Balance Sheets and the Business Cycle
Philip Lowe,Thomas Rohling +1 more
TL;DR: In this article, the authors develop a simple model in which the information problems between risk-averse management and the firm's owners lead to investment decisions that depend upon the financial condition of the firm.
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Investment and Debt Constraints: Evidence from Dutch Panel Data
Elmer Sterken
- 01 Jan 1998
TL;DR: In this paper, the authors pointed out that the empirical relevance of the MM-proposition is small and pointed out the fact that real markets are sometimes affected by imperfections and their consequences and that the functioning of financial markets is mostly assumed to be perfect and efficient.
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Government Policy, Credit Markets and Economic Activity
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Consumer Credit Risk and Pricing
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Asset Prices and Business Cycles with Financial Shocks
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TL;DR: In this paper, a production-based asset pricing model with financially constrained firms was developed to explain the observed high asset price volatility, where investment opportunities are scarce and firms face two shocks: classic productivity shocks and financial shocks that affect the tightness of the financial constraint.
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Kai Lai Chung
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TL;DR: This edition of A Course in Probability Theory includes an introduction to measure theory that expands the market, as this treatment is more consistent with current courses.
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Irving Fisher
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