1 MORAL - HAZARD CREDIT CYCLES WITH RISK - AVERSE AGENTS by Roger
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چکیده
MORAL-HAZARD CREDIT CYCLES WITH RISK-AVERSE AGENTS by Roger B. Myerson http://home.uchicago.edu/~rmyerson/research/rabankers.pdf Abstract: We consider a simple overlapping-generations model with risk-averse financial agents subject to moral hazard. Efficient contracts for such financial intermediaries involve backloaded late-career rewards. Compared to the analogous model with risk-neutral agents, risk aversion tends to reduce the growth of agents' responsibilities over their careers. This moderation of career growth rates can reduce the amplitude of the widest credit cycles, but it also can cause small deviations from steady state to amplify over time in rational-expectations equilibria. We find equilibria in which fluctuations increase until the economy enters a boom/bust cycle where no financial agents are hired in booms.
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