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Monetary shocks, agency costs, and business cycles

Charles Carlstrom and Timothy Fuerst

No 11, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: This paper integrates money into a real model of agency costs. Money is introduced by imposing a cash-in-advance constraint on a subset of transactions. The underlying real model is a standard real-business-cycle model modified to include endogenous agency costs. The paper?s chief contribution is to demonstrate how the monetary transmission mechanism is altered by these endogenous agency costs. In particular, do agency costs amplify and/or propagate monetary shocks?

Keywords: Monetary policy; Business cycles (search for similar items in EconPapers)
Date: 2000, Revised 2000
New Economics Papers: this item is included in nep-dge and nep-mon
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