Monopolistic competition, relative prices, and output adjustment in the open economy
AbstractThe purpose of this paper is to explain price and output dynamics in an open economy characterized by a monopolistic competitive market structure in which pricing decisions incur costs. That lead producers to pre-set the price path for several periods. The paper derives an optimal pricing rule, including the optimal pre-setting horizon. It does so for a rational expectation equilibrium, characterized by staggered, unsynchronized price setting, for which the degree of staggering is endogenously determined. The discussion focuses on the critical role of the degree of domestic-foreign goods substitutability in explaining price and output effects of monetary and real shocks.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 8 (1989)
Issue (Month): 1 (March)
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Web page: http://www.elsevier.com/locate/inca/30443
Other versions of this item:
- Joshua Aizenman, 1986. "Monopolistic Competition, Relative Prices and Output Adjustment in the Open Economy," NBER Working Papers 1787, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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