Informational Imperfections in the Capital Market and Macro-Economic Fluctuations / Bruce C. Greenwald, Joseph E. Stiglitz, Andrew Weiss.

By:

Greenwald, Bruce C

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w1335.Publication details: Cambridge, Mass. National Bureau of Economic Research 1984.Description: 1 online resource: illustrations (black and white)Subject(s):

E - Macroeconomics and Monetary Economics

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: This paper describes the role that informational imperfections in capital markets are likely to play in business cycles. It then developes a simple illustrative model of the impact of adverse selection in the equity market and the way in which this may lead to large fluctuations in the effective cost of capital in response to relatively small demand shocks.Abstract: The model also derives an expression for the cost of equity capital in the presence of adverse selection and provides informational explanations for several widely observed macro-economic phenomena.

Tags from this library: No tags from this library for this title. Log in to add tags.

Average rating: 0.0 (0 votes)

Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w1335 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

Collection: Colección NBER Close shelf browser (Hides shelf browser)

Previous	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	Next
Previous	nber w13347 Chernobyl's Subclinical Legacy: Prenatal Exposure to Radioactive Fallout and School Outcomes in Sweden /	nber w13348 Diversity and Crowd-out: A Theory of Cold-Glow Giving /	nber w13349 China's WTO Entry: Antidumping, Safeguards, and Dispute Settlement /	nber w1335 Informational Imperfections in the Capital Market and Macro-Economic Fluctuations /	nber w13350 Contracting for Government Services: Theory and Evidence from U.S. Cities /	nber w13351 The Evolution of Inequality in Productivity and Wages: Panel Data Evidence /	nber w13352 The Impact of Employer Matching on Savings Plan Participation under Automatic Enrollment /	Next

April 1984.

This paper describes the role that informational imperfections in capital markets are likely to play in business cycles. It then developes a simple illustrative model of the impact of adverse selection in the equity market and the way in which this may lead to large fluctuations in the effective cost of capital in response to relatively small demand shocks.

The model also derives an expression for the cost of equity capital in the presence of adverse selection and provides informational explanations for several widely observed macro-economic phenomena.