Microentrepreneurship and the business cycle: is self-employment a desired outcome?
AbstractShould a central bank accommodate energy price shocks? Should the central bank use core inflation or headline inflation with the volatile energy component in its Taylor rule? To answer these questions, we build a dynamic stochastic general equilibrium model with energy use, durable goods, and nominal rigidities to study the effects of an energy price shock and its impact on the macroeconomy when the central bank follows a Taylor rule. We then study how the economy performs under alternative parameterizations of the rule with different weights on headline and core inflation after an increase in the energy price. Our simulation results indicate that a central bank using core inflation in its Taylor rule does better than one using headline inflation because the output drop is less severe. In general, we show that the lower the weight on energy price inflation in the Taylor rule, the impact of an energy price increase on gross domestic product and inflation is also lower.
Download InfoIf 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.
Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2007-15.
Date of creation: 2007
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-13 (All new papers)
- NEP-CBA-2007-07-13 (Central Banking)
- NEP-DGE-2007-07-13 (Dynamic General Equilibrium)
- NEP-ENT-2007-07-13 (Entrepreneurship)
- NEP-MAC-2007-07-13 (Macroeconomics)
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.:
- Prabir C. Bhattacharya, 2002. "Rural-to-urban migration in LDCS: a test of two rival models," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(7), pages 951-972.
- Florin O. Bilbiie & Fabio Ghironi & Marc J. Melitz, 2012.
"Endogenous Entry, Product Variety, and Business Cycles,"
Journal of Political Economy,
University of Chicago Press, vol. 120(2), pages 304 - 345.
- Bilbiie, Florin Ovidiu & Ghironi, Fabio & Melitz, Marc J, 2011. "Endogenous Entry, Product Variety, and Business Cycles," CEPR Discussion Papers 8564, C.E.P.R. Discussion Papers.
- Florin Bilbiie & Fabio Ghironi & Marc Melitz, 2012. "Endogenous Entry, Product Variety and Business Cycles," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) hal-00680634, HAL.
- Florin Bilbiie & Fabio Ghironi & Marc J. Melitz, 2007. "Endogenous Entry, Product Variety, and Business Cycles," NBER Working Papers 13646, National Bureau of Economic Research, Inc.
- Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
- Maloney, William, 2003.
Policy Research Working Paper Series
2965, The World Bank.
- Hugo Ñopo & Patricio Valenzuela, 2007.
"Becoming an Entrepreneur,"
Research Department Publications
4519, Inter-American Development Bank, Research Department.
- Carrasco, R., 1997.
"Transitions to and from Self-Employment in Spain: An Empirical Analysis,"
9710, Centro de Estudios Monetarios Y Financieros-.
- Carrasco, Raquel, 1999. " Transitions to and from Self-employment in Spain: An Empirical Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(3), pages 315-41, August.
- Earle, John S. & Sakova, Zuzana, 2000. "Business start-ups or disguised unemployment? Evidence on the character of self-employment from transition economies," Labour Economics, Elsevier, vol. 7(5), pages 575-601, September.
- Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
- Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
- Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
- Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
- Evans, David S, 1987.
"Tests of Alternative Theories of Firm Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 95(4), pages 657-74, August.
- Blanchflower, D.G. & Oswald, A., 1991.
"What Makes an Entrepreneur?,"
Economics Series Working Papers
99125, University of Oxford, Department of Economics.
- McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
- Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, vol. 13(2), pages 275-302, May.
- Carol Moore & Richard Mueller, 2002. "The transition from paid to self-employment in Canada: the importance of push factors," Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 791-801.
- Gabriel V. Montes Rojas & Lucas Siga, 2009. "On the nature of micro-entrepreneurship: evidence from Argentina," Applied Economics, Taylor & Francis Journals, vol. 41(21), pages 2667-2680.
- David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector).
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.