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On business cycles of variety and quality

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  • Masashige Hamano

    () (CREA, Université du Luxembourg)

Abstract

This paper explores the role played by product variety and quality in a real business cycle model. Firms are heterogeneous in terms of their specific quality as well as pro- ductivity levels. Firms which have costly technology enter in a period of high aggregated demand and produce high quality goods. Thus, the average quality level and number of available varieties are procyclical, as in the data. The model can replicate the observed inflationary bias in the conventional Consumer Price Index due to a rise in the number of new product varieties and quality.

Suggested Citation

  • Masashige Hamano, 2013. "On business cycles of variety and quality," CREA Discussion Paper Series 13-21, Center for Research in Economic Analysis, University of Luxembourg.
  • Handle: RePEc:luc:wpaper:13-21
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    Cited by:

    1. repec:red:issued:15-258 is not listed on IDEAS
    2. Masashige Hamano & Francesco Zanetti, 2017. "Endogenous Turnover and Macroeconomic Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 263-279, October.
    3. Abe, Naohito & Inakura, Noriko & Tonogi, Akiyuki, 2017. "Effects of the Entry and Exit of Products on Price Indexes," RCESR Discussion Paper Series DP17-2, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Keywords

    Entry and exit; firm heterogeneity; the Schumpeterian destruction; product quality; business cycles;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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