Aggregate Consequences of Limited Contract Enforceability
Posted: 8 Jul 2004
There are 3 versions of this paper
Aggregate Consequences of Limited Contract Enforceability
UPF Economics and Business Working Paper 843
Number of pages: 37
Posted: 30 Nov 2005
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Aggregate Consequences of Limited Contract Enforceability
NBER Working Paper No. w10132
Number of pages: 38
Posted: 08 Dec 2003
Last Revised: 09 Sep 2022
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73
Aggregate Consequences of Limited Contract Enforceability
Number of pages: 40
Posted: 19 Jan 2004
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34
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. This implies that economies with lower enforceability of contracts are characterized by greater macroeconomic volatility. A key assumption for the amplification result is that defaulting entrepreneurs are not excluded from the market.
Suggested Citation: Suggested Citation
Cooley, Thomas F. and Marimon, Ramon and Quadrini, Vincenzo, Aggregate Consequences of Limited Contract Enforceability. Journal of Political Economy, Vol. 112, pp. 817-847, August 2004, Available at SSRN: https://ssrn.com/abstract=562406
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