Advanced Search
MyIDEAS: Login to save this paper or follow this series

Limited participation or sticky prices? New evidence from firm entry and failures

Contents:

Author Info

  • Lenno Uusküla

    ()

Abstract

Traditional models of monetary transmission such as sticky price and limited participation abstract from firm creation and destruction. Only a few papers look at the empirical effects of the monetary shock on the firm turnover measures. But what can we learn about monetary transmission by including measures for firm turnover into the theoretical and empirical models? Based on a large scale vector autoregressive (VAR) model for the U.S. economy I show that a contractionary monetary policy shock increases the number of business bankruptcy filings and failures, and decreases the creation of firms and net entry. According to the limited participation model, a contractionary monetary shock leads to a drop in the number of firms. On the contrary the same shock in the sticky price model increases the number of firms. Therefore the empirical findings support more the limited participation type of the monetary transmission

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.eestipank.info/pub/en/dokumendid/publikatsioonid/seeriad/uuringud/_2008/_7_2008/_wp_708.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number 2008-07.

as in new window
Length:
Date of creation: 02 Dec 2008
Date of revision: 02 Dec 2008
Handle: RePEc:eea:boewps:wp2008-07

Contact details of provider:
Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
Phone: +3726680719
Fax: +3726680900
Email:
Web page: http://www.bankofestonia.info
More information through EDIRC

Order Information:
Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
Email:

Related research

Keywords: monetary transmission; limited participation; sticky prices; firm entry; firm bankruptcy; structural VAR;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Harald Uhlig, 1995. "A toolkit for analyzing nonlinear dynamic stochastic models easily," Discussion Paper / Institute for Empirical Macroeconomics 101, Federal Reserve Bank of Minneapolis.
  2. Lewis, Vivien, 2008. "Business cycle evidence on firm entry," Discussion Paper Series 1: Economic Studies 2008,08, Deutsche Bundesbank, Research Centre.
  3. Jeffrey Campbell, 1998. "Entry, Exit, Embodied Technology, and Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 371-408, April.
  4. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
  5. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Liquidity Effects and the Monetary Transmission Mechanism," American Economic Review, American Economic Association, vol. 82(2), pages 346-53, May.
  6. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1997. "Sticky price and limited participation models of money: A comparison," European Economic Review, Elsevier, vol. 41(6), pages 1201-1249, June.
  7. Boivin, Jean & Giannoni, Marc & Mihov, Ilian, 2007. "Sticky Prices and Monetary Policy: Evidence from Disaggregated US Data," CEPR Discussion Papers 6101, C.E.P.R. Discussion Papers.
  8. Galí, Jordi, 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," CEPR Discussion Papers 1499, C.E.P.R. Discussion Papers.
  9. Morten O. Ravn & Saverio Simonelli, 2008. "Labor Market Dynamics and the Business Cycle: Structural Evidence for the United States," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 743-777, 03.
  10. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
  11. Bernanke, Ben S. & Mihov, Ilian, 1995. "Measuring Monetary Policy," Economics Series 10, Institute for Advanced Studies.
  12. Bergin, Paul R. & Corsetti, Giancarlo, 2008. "The extensive margin and monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1222-1237, October.
  13. Marimon, Ramon & Scott, Andrew (ed.), 1999. "Computational Methods for the Study of Dynamic Economies," OUP Catalogue, Oxford University Press, number 9780198294979, September.
  14. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  15. Mertens, Karel, 2008. "Deposit rate ceilings and monetary transmission in the US," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1290-1302, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Vivien LEWIS & Céline POILLY, 2011. "Firm Entry, Inflation and the Monetary Transmission Mechanism," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Lewis, Vivien, 2008. "Business cycle evidence on firm entry," Discussion Paper Series 1: Economic Studies 2008,08, Deutsche Bundesbank, Research Centre.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eea:boewps:wp2008-07. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peeter Luikmel).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.