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Firms' entry, monetary policy and the international business cycle

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  • Cavallari, Lilia

Abstract

This paper provides a theory of the international business cycle grounded on firms' entry and sticky prices. It shows that under simple monetary rules pro-cyclical entry and counter-cyclical markups can generate fluctuations in macroeconomic aggregates and trade variables as large as those observed in the data while at the same time providing positive international comovements. Both firms' entry and sticky prices are essential for reproducing the synchronization of the business cycles found in the data.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41876.

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Date of creation: Jul 2012
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Handle: RePEc:pra:mprapa:41876

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Keywords: firm entry; international business cycle; international comovements; variable markup; Taylor rule; exchange rate regimes;

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Citations

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Cited by:
  1. Cavallari, Lilia, 2013. "A note on firm entry, markups and the business cycle," Economic Modelling, Elsevier, vol. 35(C), pages 528-535.
  2. Giuseppe Fiori & Fabio Ghironi & Matteo Cacciatore, 2012. "Market Deregulation and Optimal Monetary Policy in a Monetary Union," 2012 Meeting Papers 678, Society for Economic Dynamics.
  3. Lilia Cavallari, 2012. "Modelling Entry Costs: Does It Matter For Business Cycle Transmission?," Working Papers 0712, CREI Università degli Studi Roma Tre, revised 2012.
  4. Matteo Cacciatore, 2013. "Trade, Unemployment, and Monetary Policy," 2013 Meeting Papers 724, Society for Economic Dynamics.
  5. Cavallari, Lilia, 2012. "Markups and Entry in a DSGE Model," MPRA Paper 41816, University Library of Munich, Germany.
  6. Carla La Croce & Lorenza Rossi, 2014. "Endogenous Firms Dynamics and Banking," DEM Working Papers Series 072, University of Pavia, Department of Economics and Management.

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