TY  - JOUR
AU  - Cooley,Thomas
AU  - Marimon,Ramon
AU  - Quadrini,Vincenzo
TI  - Aggregate Consequences of Limited Contract Enforceability
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10132
PY  - 2003
Y2  - December 2003
UR  - http://www.nber.org/papers/w10132
L1  - http://www.nber.org/papers/w10132.pdf
N1  - Author contact info:
Thomas F. Cooley
Department of Economics
Stern School of Business
44 West 4th Street, Room 7-88
New York, NY  10012-1126
Tel: 212/998-0870
Fax: 212/995-4218
E-Mail: tcooley@stern.nyu.edu

Ramon Marimon
European University Institute
Max Weber Programme
Via delle Fontanelle 20
I-50016 San Domenico di Fiesole
ITALY
Tel: 34-93-542-2707
Fax: 34-93-542-1746
E-Mail: ramon.marimon@eui.eu

Vincenzo Quadrini
Department of Finance and Business Economics
Marshall School of Business
University of Southern California
701 Exposition Boulevard
Los Angeles, CA 90089
Tel: 213/740-6521
Fax: 213/740-6650
E-Mail: quadrini@usc.edu
AB  - 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.
ER  -