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Macroeconomics of extensive margins: a simple model

  • Marta Arespa

    ()

    (Departament de Teoria Econòmica and CREB, Universitat de Barcelona, Spain)

How do monopolistically competitive industries react to shocks in the context of a New Keynesian macro model? I bridge macroeconomics and trade theory by considering market dynamics. I use an analytically tractable closed-economy model with endogenous entry of firms and show the implications of markets structure for the transmission of real shocks on aggregate variables and welfare. Shock sources become crucial for the results: traditional productivity shocks cause an extensive effect on production; shocks on innovation cause an intensive impact. More patient populations bring the economy to a richer market, although it cushions the extensive effect after an innovation shock.

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File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2011-19.pdf
File Function: First version, 2011
Download Restriction: no

File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2011-19.pdf
File Function: Revised version, 2011
Download Restriction: no

Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2011-19.

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Length: 38 pages
Date of creation: Nov 2011
Date of revision: Nov 2011
Handle: RePEc:xrp:wpaper:xreap2011-19
Contact details of provider: Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
Phone: +34+934039653
Web page: http://www.pcb.ub.edu/xreap
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