Salyer, Kevin; Lee, Gabriel - Economics Department, University of California-Davis - 2006
We extend the Carlstrom and Fuerst (1997) agency cost model of business cycles by including time varying uncertainty in … increase in uncertainty causes, ceteris paribus, a fall in investment supply. A second key result is that time varying … uncertainty results in countercyclical bankruptcy rates - a finding which is consistent with the data and opposite the result in …