Aggregate Consequences of Limited Contract Enforceability

Thomas Cooley, Ramon Marimon and Vincenzo Quadrini

No 4173, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study a general equilibrium model in which entrepreneurs finance investment with optimal financial contracts. Because of enforceability problems, contracts are constrained efficient. We show that limited enforceability amplifies the impact of technological innovations on aggregate output. More generally, we show that lower enforceability of contracts will be associated with greater aggregate volatility. A key assumption for this result is that defaulting entrepreneurs are not excluded from the market.

Keywords: G00; Contract enforceability; Aggregate volatility; Amplification (search for similar items in EconPapers)
JEL-codes: E30 (search for similar items in EconPapers)
Date: 2004-01
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (236)

Downloads: (external link)
https://cepr.org/publications/DP4173 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Aggregate Consequences of Limited Contract Enforceability (2003)
Working Paper: Aggregate Consequences of Limited Contract Enforceability (2003)
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:cpr:ceprdp:4173

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP4173

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().