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Endogenous Firm Entry in an Estimated Model of the U.S. Business Cycle

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  • Offick, Sven
  • Winkler, Roland

Abstract

This paper explores and quantifies the role of endogenous firm entry in amplifying and propagating shocks to the economy. To this end, we estimate two DSGE models on US data with Bayesian methods: one model with endogenous firm entry and translog preferences and one model without. Both models perform equally well in fitting the data but in doing so the endogenous entry model does not rely on a fairly flexible supply of labor. The presence of firm entry amplifies the effects of productivity and wage mark-up shocks, but it dampens those of aggregate demand and investment-specific technology shocks.

Suggested Citation

  • Offick, Sven & Winkler, Roland, 2013. "Endogenous Firm Entry in an Estimated Model of the U.S. Business Cycle," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79845, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:79845
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    References listed on IDEAS

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    Cited by:

    1. Fabio Ghironi & Sanjay K. Chugh, 2010. "Optimal Fiscal Policy with Endogenous Product Variety," 2010 Meeting Papers 812, Society for Economic Dynamics.
    2. Lenno Uuskula, 2015. "Firm turnover and inflation dynamics," Bank of Estonia Working Papers wp2015-01, Bank of Estonia, revised 03 Feb 2015.

    More about this item

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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