Customer flows, countercyclical markups, and the persistent effects of monetary shocks
AbstractThis paper develops a general equilibrium model in which households face fixed costs associated with searching for a new supplier of consumption goods. These search costs provide firms with some monopoly power over their existing customers and generate the kind of customer flow dynamics first considered by Phelps and Winter. Customer flows, in turn, cause markups of price over marginal cost to vary countercyclically, both amplify and propagate the effects of technology shocks on output, and allow the effects of monetary shocks on output to persist.
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 Richmond in its series Working Paper with number 95-04.
Date of creation: 1995
Date of revision:
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.:
- Robert J. Gordon, 1981.
"Output Fluctuations and Gradual Price Adjustment,"
NBER Working Papers
0621, National Bureau of Economic Research, Inc.
- Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-55, December.
- Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
- Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
- Olivier J. Blanchard, 1982. "Price Asynchronization and Price Level Inertia," NBER Working Papers 0900, National Bureau of Economic Research, Inc.
- Tobin, James, 1977.
"How Dead Is Keynes?,"
Western Economic Association International, vol. 15(4), pages 459-68, October.
- Blinder, Alan S. & Fischer, Stanley, 1981.
"Inventories, rational expectations, and the business cycle,"
Journal of Monetary Economics,
Elsevier, vol. 8(3), pages 277-304.
- Alan S. Blinder & Stanley Fischer, 1982. "Inventories, Rational Expectations, and the Business Cycle," NBER Working Papers 0381, National Bureau of Economic Research, Inc.
- A. S. Blinder & S. Fischer, 1978. "Inventories, Rational Expectations, and the Business Cycle," Working papers 220, Massachusetts Institute of Technology (MIT), Department of Economics.
- repec:nbr:nberre:0126 is not listed on IDEAS
- Laurence Ball & David Romer, 1990.
"Real Rigidities and the Non-Neutrality of Money,"
NBER Working Papers
2476, National Bureau of Economic Research, Inc.
- Cogley, Timothy & Nason, James M, 1995.
"Output Dynamics in Real-Business-Cycle Models,"
American Economic Review,
American Economic Association, vol. 85(3), pages 492-511, June.
- Robert E. Hall, 1975. "The Rigidity of Wages and the Persistence of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 301-350.
- Julio J. Rotemberg & Michael Woodford, 1991. "Markups and the Business Cycle," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 63-140 National Bureau of Economic Research, Inc.
- Taylor, John B, 1980.
"Aggregate Dynamics and Staggered Contracts,"
Journal of Political Economy,
University of Chicago Press, vol. 88(1), pages 1-23, February.
- Feldman, Mark & Gilles, Christian, 1985. "An expository note on individual risk without aggregate uncertainty," Journal of Economic Theory, Elsevier, vol. 35(1), pages 26-32, February.
- Howitt, Peter, 1988. "Business Cycles with Costly Search and Recruiting," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 147-65, February.
- Wright, Randall, 1986. "Job Search and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 38-55, February.
- Gottfries, Nils, 1986. " Price Dynamics of Exporting and Import-Competing Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(2), pages 417-36.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (William Perkins).
If references are entirely missing, you can add them using this form.