Temsilcilik maliyetleri, maliye politikası ve konjonktür dalgalanmaları

This paper studies the relationship between fiscal policy, financial market frictions, and business cycle fluctuations. It is shown that in an economy where balance sheets play a role in the propagation of shocks, using countercyclical policy net worth and output fluctuations can be reduced. This countercyclical fiscal policy requires to distribute resources to the entrepreneurs when a negative technology shock is realized and levy taxes on entrepreneurs after the technology shock is back to zero. It is shown that after the realization of a negative shock, countercyclical fiscal policy reduces agency costs which would make entrepreneurs increase investment and dampen the business cycle fluctuations via decreasing fluctuations in net worth. By this increase in investment, financial fragility decreases, which reduces the slowdown of economic activity.