EconPapers    
Economics at your fingertips  
 

Agency Costs, Net Worth, and the Credit Channel of Monetary Transmission

Christian Fachat

No 3/2000, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: This paper presents a full model of the Credit Channel of the monetary transmission mechanism. In particular, the special role of the banking sector is derived endogenously and special attention is paid to the role of borrowers' net worth. A debt contracting problem with asymmetric information and heterogeneous borrowers is embedded in a stochastic dynamic general equilibrium model with money. In contrast to the traditional assumption, the paper assumes that agency costs arise in the production of aggregate output instead of in the investment sector. Numerical simulations of the model economy show two major points: First, the model with heterogeneous borrowers does not replicate as many stylized facts as the model without heterogeneous borrowers. Second, the model dampens the impulse response of output after a positive money supply shock, compared to the standard monetary business cycle model. Interestingly, the results of this paper differ considerably from the results o! f a related paper with agency costs arising in the production of the investment good.

Keywords: financial intermediation; costly state verification; monetary transmission mechanism; credit channel; limited participation; liquidity effect (search for similar items in EconPapers)
JEL-codes: E13 E32 E44 E51 (search for similar items in EconPapers)
Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/78432/1/bgse3_2000.pdf (application/pdf)

Related works:
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:zbw:bonedp:32000

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2019-03-02
Handle: RePEc:zbw:bonedp:32000