NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Financial Market Imperfections and Business Cycles

Bruce C. Greenwald, Joseph E. Stiglitz

NBER Working Paper No. 2494 (Also Reprint No. r1789)
Issued in 1988
NBER Program(s):   ME

This paper develops a simple model of macroeconomic behavior which incorporates the impact of financial market "imperfections," such as those generated by asymmetric information in financial markets. These information asymmetries may lead to breakdowns in markets, like that for equity, in which risks arm shared. In particular, we analyze firm behavior in the presence of equity rationing and imperfect futures markets, in which there are lags in production. Aft a consequence, firms act in a risk-averse manner. We trace out the macroeconomic consequences, and show that they are able to account for many of the widely observed aspects of actual business cycles.

download in pdf format
   (825 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2494

Published: The Quarterly Journal of Economics, Vol. 108, pp. 77-114 (February 1993). citation courtesy of

Users who downloaded this paper also downloaded these:
Hubbard w5996 Capital-Market Imperfections and Investment
Greenwald and Stiglitz w3359 Asymmetric Information and the New Theory of the Firm: Financial Constraints and Risk Behavior
Greenwald and Stiglitz w3533 Macroeconomic Models with Equity and Credit Rationing
Greenwald, Stiglitz, and Weiss w1335 Informational Imperfections in the Capital Market and Macro-Economic Fluctuations
Stiglitz w15718 Risk and Global Economic Architecture: Why Full Financial Integration May Be Undesirable
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us