Endogenous Entry, International Business Cycles, and Welfare
AbstractThis paper examines if taking into account changes in the number of producers, or equivalently changes in the product variety space over the business cycle, helps to understand and replicate international business cycle facts. To this end, we develop a two-country model in which the economy is driven by real and monetary policy shocks. It is characterized by an endogenous number of firms and varieties, sticky prices and financial markets incompleteness. We show that these features are crucial to reproduce international business cycle statistics. We also evaluate the welfare implications of various monetary policies and highlight the importance for monetary policymakers to respond moderately to output fluctuations.
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Bibliographic InfoPaper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 11-05.
Length: 34 pages
Date of creation: 31 Mar 2011
Date of revision:
International Business Cycles; Endogenous Entry; Financial Markets Incompleteness; Sticky Prices; Monetary Policy; Welfare;
Other versions of this item:
- Stéphane Auray & Aurélien Eyquem, 2011. "Endogenous Entry, International Business Cycles, and Welfare," Working Papers 1114, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- Stéphane Auray & Aurélien Eyquem, 2011. "Endogenous Entry, International Business Cycles, and Welfare," Post-Print halshs-00581165, HAL.
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-09 (All new papers)
- NEP-DGE-2011-04-09 (Dynamic General Equilibrium)
- NEP-MAC-2011-04-09 (Macroeconomics)
- NEP-OPM-2011-04-09 (Open Economy Macroeconomics)
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