Abstract
In models with financial frictions, state-contingent contracts stabilize the business cycle relative to contracts with predetermined repayments. We show that this finding depends on whether predetermined repayments are set in real or nominal terms. State-contingent contracts may amplify supply-driven recessions compared to contracts set in nominal terms.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
