The study looks at how a small open economy's business cycles are affected by agency costs. By incorporating asymmetry in information and agency costs into a dynamic general equilibrium model, the researchers found that entrepreneurs' investment activities are limited by their net worth. This limitation influences the level of internal financing available for projects, which in turn impacts the overall economic activity. The model was able to replicate Canadian economic trends accurately and showed closer predictions to real data compared to traditional models in terms of output growth and investment patterns.