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Firms' entry, monetary policy and the international business cycle

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  • Cavallari, Lilia

Abstract

This paper proposes a two-country monetary model with firm entry as a means for alleviating the comovement puzzles in international business cycle models. It shows that business formation can generate fluctuations in output, employment, investment and trade flows close to those in the data while at the same time providing positive international comovements. Simulations show that the presence of imported investment goods is essential for replicating these facts.

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  • Cavallari, Lilia, 2013. "Firms' entry, monetary policy and the international business cycle," Journal of International Economics, Elsevier, vol. 91(2), pages 263-274.
    • Handle: RePEc:eee:inecon:v:91:y:2013:i:2:p:263-274
    DOI: 10.1016/j.jinteco.2013.07.002
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    More about this item

    Keywords

    Firm entry; International business cycle; International comovements; Comovement puzzles; Taylor rule; Firm markups;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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