TIME‐VARYING UNCERTAINTY AND THE CREDIT CHANNEL

Victor Dorofeenko, Gabriel Lee and Kevin Salyer ()

Bulletin of Economic Research, 2008, vol. 60, issue 4, 375-403

Abstract: We extend the Carlstrom and Fuerst (American Economic Review, 1997, 87, pp. 893–910) 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. We also show that persistence of uncertainty affects both quantitatively and qualitatively the behaviour of the economy.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
https://doi.org/10.1111/j.1467-8586.2008.00284.x

Related works:
Working Paper: Time-Varying Uncertainty and the Credit Channel (2006)
Working Paper: Time-Varying Uncertainty and the Credit Channel (2004)
Working Paper: Time-Varying Uncertainty and the Credit Channel (2002)
Working Paper: Time Varying Uncertainty and the Credit Channel (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:buecrs:v:60:y:2008:i:4:p:375-403

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0307-3378

Access Statistics for this article

More articles in Bulletin of Economic Research from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().